December 4, 2019
This article was originally published in MarTech Advisor.
What better way to delight your customer than with a price they are comfortable paying? A data-driven approach to pricing will help satisfy customers, give you a way to measurably manage customer experience, and boost your bottom line, writes, Ben Blaney, Vice President, Business Consulting for Vendavo.
52% of the Fortune 500 companies have disappeared since 2000 and technological disruption is one of the biggest contributing factors. Digital innovation is shaking up business and there’s no better example of this than in rising customer experience (CX) expectations. Convenient, personalized experiences must be the norm for any organization to remain relevant, let alone succeed, and price is an important part.
We first saw rising CX demands in the B2C space and today, business buyers have brought their consumer buying preferences to their professional relationships. In new research from Salesforce, the State of the Connected Customer, we see that 73% of business buyers say their standards for good experiences are higher than ever. Further, 67% of business buyers have switched vendors for a more consumer-like experience.
With growing demand for better CX, businesses of all sizes across every industry are scrambling to make improvements. They’re making innovative, more user-friendly changes in where they do business – from the brick and mortar storefronts to their websites; they’re training up their staff to be more responsive; they’re introducing creative new ways in which they communicate across the buying cycle and of course, they’re personalizing their offers.
Pricing – A Great Example of CX Innovation
Another good example of CX innovation should be found within your pricing function. What better way to delight your customer than with a price they are comfortable paying? A data-driven approach to pricing will not only help satisfy customers, it will also give you a way to measurably manage CX and boost your bottom line. The right price for the right product at the right time will work wonders on your CX and, because a 1% improvement in price can lead to more than 7% increase in profits, the move will grow your margin at the same time.
But where do you start? Fortunately, even small changes in your pricing process can influence your CX perceptions in the four areas that matter most: your products, the company brand, your employees and, of course, your customers.
When it comes to price, one size does not fit all. Customers have different needs and therefore assign varying levels of value to your product/service. Segmenting according to such groups as industry and region and understanding their willingness to pay will get you most of the way there. If you are still operating off of one basic price list, it’s time to meet your customers where they are on price rather than leaning on your sales team to ‘discount as needed’ to get deals done and sacrifice profitability.
Directly surveying customers about the totality of their perspectives matters too. When you ask, you will learn your strengths and weaknesses of the sales process, the frustrations caused by customer service chatbots and telephone hold-times, and about toe-curling anger resulting from repeated invoice errors. Recognizing these elements and quantifying them are what will help the organization continue to sell, and at the prices that match the customers’ perception of fair value.
Buyers who are interested in your product or service also expect the entire transaction to be convenient and even pleasant. The first step toward this goal is to ensure you can deliver appropriately priced, accurate quotes quickly. Then, while in the contract stage, consider allowing flexible terms that meet their needs, including pay-as-you-go options. As possible, don’t go into battle over down-sell offers. Lastly, when it comes to product fulfillment, something as simple as supporting different ship-to locations will score some big points in your customer’s experience with you.
Setting the price for new products or for new features that become available to existing products has always been problematic. The reason is the lack of hard data about customer preference for product A over product B or option 1 over option 2. Price sensitivity meters like Van Westendorp are interesting but often have proved difficult to scale. Today’s price management technology allows proactive pricing to be refined to a point of previously unimaginable granularity. This precision can be combined with agile, enterprise-level integration so that your strategies can be executed as planned and aligned with all your policies. Results are continuously measured for performance, providing feedback for profitability improvements.
Brand Experience matters. It’s important for organizations to understand the power of their brand, particularly in a world where it is common for a single business to own several brands.
According to the Salesforce research, 63% of business buyers say they share negative experiences with others while 77% say they share good experiences. To make sure you are putting your best foot forward, compare your current price setting data (cost of goods, competitive prices, etc.) with any CX data you have.
For example, if you’re currently using a cost-plus pricing approach, how does that price line up with what customers are telling you in your surveys? Or perhaps more realistically, what’s happening with your order volumes? If you’re seeing a decrease across the board or in one region, have you asked your customers why? Brands that respond quickly to what customers have to say will fare much better in the race to the bottom line.
When it comes to CX, it’s critical not to forget the faces of your organization – your employees. Through the lens of pricing, that means every group that touches a prospective or current customer must be familiar with and supportive of your pricing. Sales, marketing, customer service, product management, operations, legal…all of them touch customers in some way. Surveying employees to discover what works (and what doesn’t) is key. Organizations with internal disharmony will lack speed in responsiveness, seem deaf to customer needs, and fail the test of “easy to do business with.” If internal hurdles aren’t addressed, they will quickly lead to profoundly negative second-order effects.
The goal of CX improvements is happier customers and, in the end, a more successful bottom line. Strategic pricing initiatives integrated with CX efforts will bring you light years forward toward those goals.
Interested in learning more? Download our new infographic, Pricing’s Hidden Opportunity.