In a world that is continually changing due to rapid technological advancements, global proliferation and shifting customer needs, no longer can Companies survive on one static pricing strategy. It’s imperative to be constantly launching, testing, evaluating and iterating pricing strategies in order to extract as much market value.
According to research conducted by ProfitWell, every 6-9 months is the sweet spot for making changes to pricing strategies. Even a 1% price increase can result in a bottom line improvement of up to 12.70%.
Let’s delve into the importance of how you can test and learn from executing various pricing strategies to drive revenue growth:
1. Mirror your customer’s behavior
Customer usage behavior can be a powerful window into how you can potentially cross-sell or up-sell solutions to them. It can reveal usage patterns such as minimum usage, where thresholds lie and the seasons where usage of a product may particularly increase.
For example, if a customer is on a particular monthly subscription plan to use a SaaS CRM solution, but they are starting to exceed their contact quota in certain months, you could potentially create a new higher pricing plan that enables them to peak to this contact limit without extra charge. The benefit is that your businesses will be reaping a steady flow of increased revenue each month.
However, in order to properly execute and evaluate this new pricing strategy, it is crucial to have a billing and monetization platform that enables you to easily configure and launch this new pricing strategy and then analyze over time the impact on your revenue.
2. Combat new market entrants
In a world where global market entry, particularly for SaaS and Technology businesses has less barriers, Companies face the constant threat of new entrants undercutting them on the pricing of their comparative solutions. This can be a divisive tactic to try and steal your existing customer base.
Therefore, in the heat of the moment, it is critical that Companies have the capability to quickly react to this threat and offer promotions, discounts or coupons to ensure they can retain customers and also potentially attract new customers who are considering the competitor’s solution.
The great aspect about effective promotional tactics is that they can be deployed for limited periods of time and customers can be nurtured back to full or new pricing schemes.
In order to quickly deploy such pricing mechanics, it is important that your Company is utilizing a billing and monetization platform that can facilitate the configuration of these promotions, discounts and coupons with ease, and provide insightful reporting on their performance.
3. Leverage customization for revenue gains
We are living in a paradigm where customers are increasingly demanding more personalization. Therefore through launching and testing a feature-based pricing, companies can levy charges on their products based on the features within a service, based on the actual functionality a customer wants to use.
As a result, this dynamic pricing model enables customers to choose how they want to pay and ensures that no revenues are slipping through the cracks.
For example, a streaming service can be charged based on a) number of concurrent devices a user wants to have the service on, and b) the quality of the content required (SD Vs HD Vs 4K).
Also, the other advantage of this model is that it helps keep the product catalog size in control – in absence of such pricing, the provider would have to define a separate product for each ‘combination of features’. In the above example, 2 devices with HD quality and 4 devices with 4K quality are sold using the same product which otherwise would require the creation of two separate products.
Therefore the power lies in having the right billing and monetization platform in place to enable a pricing plan to have different variations based on certain defined rules.
To explore how OneBill can help you to quickly and easily launch, evaluate, and iterate multiple pricing strategies, take a tour of the platform today.