Pricing – Parity or Parody

Vic Hunter
Vic Hunter
Vic is founder and president of Hunter Business Group LLC. He is nationally know
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Sep 16 Voice of Customer 0 Comment

 

Keep your eye on the Ball. Margin Management. Progressive Pricing. Value Pricing. Performance/ Importance Gap Analysis. Heat Map. Key Attribute Performance. Competitive Landscape. Building Strategic Relationships. Isn’t price just cost + desired return???

 

Who are we kidding with this jargon? Less than 20% of Strategic Account Managers are rewarded on their Customer’s Loyalty Scores tied to Economic Return. If we know more do we act better? What really matters in a sustainable pricing strategy?

Well, a Sustainable Pricing Strategy does not start with pricing and it certainly doesn’t focus on measures of margin. Sustainable pricing strategies start with sustaining your business - they begin by retaining customers.

Step I: Retain your Customers

Begin with objective data. An objective win/ loss reporting program or a customer informed failure analysis in a value mapping exercise is a good place to begin. Find your customer’s pain points and act on the insights to reduce customer churn (defection) and downward product migration compared to peers. Act on your customer’s distractions and measure your improvement. This is acting on voice of customer at the transaction level.

Step II: Build Trust into Loyalty

Trust is having your customer believe that you know what their unfilled needs are and that you are capable and committed to meeting those needs. Trust and customer loyalty are not products of contract compliance; they are grown from thought leadership. Focus your discretionary resources (human and capital) on what matters. Make visible to your organization the two or three drivers of your customer loyalty and the activities that your customers attribute to those drivers. This is acting on voice of customer at the relationship level.

Step III: Bring New Value

Careful - new value is not limited to a new products or new services, it might very well be a new YOU. Of all the service values that we provide to a customer, employee loyalty has the greatest impact on customer loyalty. What value do you and your people bring to the relationship and the value of your business in the market?

The Wrap Up:

The discovery and mitigation of pain points is foundational to a focused building of value beyond the regulatory obligations of the contract. Creating meaningful observations from this discovery then leads to customer engagement in a new context.

A focus on price will lack foundation and a focus on margin will reward short term aggressive behavior. The measure of economic value - the central KPI for a sustainable pricing strategy is product / service penetration of the account. Measure the number of customers in each segment that are at full or desired levels of product and service engagement. Then, reward and price to get more of these customers through the human and capital investments that you make.

This is a system of pricing based on building stronger customer relationships focused on a limited number of discoverable, trainable, and measurable conditions.

About the author

Vic Hunter

Vic is founder and president of Hunter Business Group LLC. He is nationally known for his expertise in business-to-business direct marketing and service to the nation's leading companies.

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