June 23, 2016
I have been a parent for a little over 10 years. Surprisingly, some of the lessons I’ve learned since having children also apply to the pricing world. Here are the top 3 pricing lessons taken from my parenthood experience.
1. Segmentation is key
There is an interesting phenomenon with first-time parents. They want to get only the best for their first-born child. The best diapers, the softest baby wipes, organic skin care and hair products, BPA-free bottles, and fancy pacifiers that come with a promise that your child will sleep through the night.
I guess sleep-deprived parents will fall for any marketing campaign promising that you and your baby will be smarter, happier, and healthier. When my first daughter was born, I was not compromising on “quality” for price. I was ready to pay a premium for the brand name diapers or buy organic shampoos and creams made only from natural ingredients.
Then came baby number 2.
By then, I was a much more experienced parent, but, more importantly, pragmatic and levelheaded. I was buying for convenience and reliability and I was no longer seeing the value in premium products that justified the higher prices.
This is where segmentation comes into play. Segmenting products and customers to better fit their situations and buying behavior puts pricing power in the hands of the seller, not the buyer.
With over 4 million babies born each year in America, there’s always a new crop of inexperienced parents waiting for companies to target them with fancy (and unnecessary) products.
#2: It’s all about perceived value and willingness to pay
According to a Pew Research Center survey, both parents work full time in 46% of US households. For many working parents, there’s just not enough time to do it all. That means they value convenience and saving time, and will be ready to pay for it.
It seems like the new online delivery services like Google Shopping Express, Amazon Fresh, and Instacart were designed for working parents.
Yes, those parents that will forget to buy one ingredient for a birthday cake they need to bring to school the next day. Those parents that need one fewer errand.
READ MORE: Keeping Up with Your Competition Part I
These services provide the convenience of shopping online and having everything delivered to your doorstep the next day. This convenience means that parents have more time to spend with their kids. To these parents, the services and products increase in value, translating into a higher willingness to pay.
#3 Maximize share of wallet with context
Parents are a very distinct buying group. The characteristics and buying patterns coupled with historic purchases provide a rich contextual platform to be able to deliver targeted offers and product recommendations that ultimately can increase wallet-share and prevent customer defection.
My online delivery services know to offer beach gear when summer begins and office supply items right before the school year starts. They also recommend cross-sell products based on previous purchases or other parents’ buying patterns and remind me when I have to restock on key regular items like paper towels and snacks.
With the cost of acquiring a new customer being 6-7 times higher than retaining an existing one, such data-driven offers are instrumental to keeping a busy parent engaged, buying on a regular basis, and most importantly, not buying from competitors.
These are just a few of the lessons I’m bound to learn about pricing and parenthood. Summer vacation already kicked off 2 weeks ago, and as any parent will attest, summer camps are a whole new pricing lesson for a different blog.