When companies apply a three-lens perspective to their pricing decisions, they gain a complete view of their opportunities. They can then ensure that when pricing moves are made, they aren’t “leaving money on the table.”
Companies often overestimate customer sensitivity—and thus oversimplify pricing structures. When looking through the customer lens, ask: Who are each of my target segments, and what are they willing to pay for my product?
Each organization has its own unique set of economic considerations that influence each purchase decision. When it comes to this lens, evaluate specific metrics, such as marginal cost, attach rates, margin waterfalls, and price realization.
In competitive pricing situations, the risk of price wars and commoditization can be significant. Applying the competition lens, ask: Who are the competitors that offer alternatives? What is the value of their product versus ours, and how have they priced their products over time?
By comparing customer value with your business’s own economic figures, you can use our price elasticity tools to easily determine the relationship between supply and demand as well as price sensitivity.
By comparing your own economic factors with those of the competition, you can begin to simulate real-world scenarios and use war-game tools to develop relevant pricing strategies.
By comparing customer segments to your competitor’s pricing strategies, you can get a better understanding of different tactics used to set price points for each of your customer segments.
The greatest value comes from the combination of all three lenses—bringing together customer insights with a deep competitive analysis and evaluation of your own economic factors.
Excerpt from A Growth Zealot’s Guide to Transformation