What should should you be doing in 2019 to build and activate pricing as a driver of business growth? A combination of new capabilities, market research and decisive action is needed. The outcome can be greatly improved performance.
We see a lot of market segmentations in our work. Often these segmentations are the weakest part of the marketing plan. Many segmentations are limited to firmographic data and in some cases are simply a list of industry verticals. They are meant to find a market that fits the offer. Instead, we should segment based on emotional and economic value creation to build an offer that fits a market.
At Ibbaka we are looking forward to 2018, and to helping our clients price their offers more effectively. Pricing begins with a deep understanding of emotional and economic value and is built on a foundation of market segmentation and customer targeting. So that is where we start. We help to find your pricing strategy, set prices and then to collect and interpret data so that your pricing can evolve and shape the market.
Good market segmentation brings together customers that buy the same way and get value from a product or service offering the same way. It ensures optimized use of an organization’s resources through targeting customer segments who derive value from the offering in a way that is in alignment with the organization’s objectives of maximizing revenue, profit or margin at a reasonable cost to serve. Market segmentation is the foundation of value-based pricing. In value-based pricing the goal is to capture a fair share of the differentiated value of an offering relative to the customer’s next best competitive alternative.
It is a truism among pricing experts that you should not base your price on your costs. Your costs are your problem, not your customer's. It is up to you to manage costs relative to the value you provide and the customer's willingness to pay. This sounds good in theory, but anyone who has run a business knows that costs matter. They matter a lot. Costs cannot be ignored when one is thinking about pricing strategy.