Customer journey mapping has emerged as one of the most powerful tools in the service design toolkit. Service design is an approach to the design of a product or service where all of the customer and user touchpoints are considered. Beyond this, the experience of the people managing and delivering the service is also taken into account.
For a good detailed presentation on the customer journey see The Customer Journey Mapping Guide to Getting Started by Nichole Elizabeth DeMeré on the Wootric blog.
Ibbaka approaches pricing challenges by integrating design thinking into pricing best practices. The customer pathway is a key part of this work. So how does pricing fit into the customer pathway?
Let's look at the typical stages in the pathway. Note that the early stages are similar to those in the typical customer buying process.
- Awareness of Pain
- Awareness of Solution
Basically, consideration will occur when Awareness of Pain and Awareness of Solution occur in the same brain at the same time. It is marketing's job to make sure this happens.
To position pricing in this journey we have to unpack a few of these steps. The most important of these are Consideration, Evaluation and Decision. Pricing is at play in each of these steps.
Consideration-Make an emotional connection
Frame your offer - provide an 'order of magnitude' positioning on price
In the Consideration phase of the customer journey the potential buyer is trying to understand if the solution will actually address their pain. From a pricing perspective, this is where framing takes place. The potential customer wants to know what kind of solution this is, and have a general idea of what their commitment will have to be. This commitment includes an 'order of magnitude' understanding of price. If the buyer is looking for a consulting service that costs six figures and you are going to solve their problem with a SaaS solution that costs a few thousand dollars a month but that requires a multi-year commitment there is a serious mismatch. This kind of basic framing should be addressed in the Consideration phase. Connecting on emotional value drivers tends to be more important than economic value drivers at this phase. It is during the Consideration phase that you begin to build trust with your customer. Without trust, you will struggle to get the information you need to succeed in the Evaluation phase.
Connect on Emotional and Economic Value Drivers and Provide Evidence
In the evaluation phase your offer has become part of the consideration set. The buyer has decided the kind of solution that fits their need and is now comparing alternatives. Do not lead with price. During this phase spend time establishing your economic value relative to the alternative. This means getting a good understanding of your customer's business and how you can improve it. Value drivers come in six main buckets.
- Increase revenue
- Decrease operating expenses
- Decrease operating capital
- Decrease or defer capital investments
- Reduce risk
- Provide options
You should only focus on a few of these. Choose those where you have the most differentiated value compared to the alternative and where there is the most emotional resonance. If you find yourself negotiating price during the Evaluation phase you have done a poor job in framing your solution and in communicating value. This is not the time to get into a pricing negotiation.
Connect value to price
By the Decision phase your customer is ready to buy. Now is the time to introduce price. Do this by connecting value and price in the customer's mind, so that they understand intellectually (as economic actors) and emotionally (as human decision makers) the value and why the price is fair compensation for the value.
In many cases you will have to negotiate the final price with the procurement department. Here it is critical that the business buyer be able to make your case for you to procurement. If procurement refuses to acknowledge the value of a certain component, be prepared to remove it from the offer (procurement will often back down) . You should also be willing to negotiate a small discount or some other concessions with procurement that will make them look good (procurement people have emotions too and they need to believe they are adding value to their organization, so help them add value).
After the sale
Deliver Value and Build Trust
Pricing work continues after the sale. There will usually be up sell and cross sell opportunities. Winning renewal is key (SaaS business models tend not to work well with high churn). The best way to do all of these things is to deliver the value you have promised and to continue to build trust. If usage or engagement numbers suggest that the customer is not getting the proposed value, step in, understand why, and if necessary make adjustments to the price. If you do this proactively you will build trust and in many cases have an opportunity to build the account back up. If you wait until the customer comes to you it will be too late. The customer will already be ready to consider other solutions.
Pricing excellence is based on an understanding of how you create differentiated value. Value communication and delivery has to be woven through the entire marketing and sales process. In this way you build trust. Trust is a requirement for a successful value-based pricing program.