I’ve been thinking of a strategic way to set product and service prices that customers will be eager to pay without negotiations. I want to simply tell a customer that my product costs $123 and have them stretch the cash towards me without hesitation, even if they know that my competitors offer the same product for $100. I put my brand expertise and design thinking skills to the test and started studying what makes customers pay without negotiating. I read How to Price a Product, Pricing a product by Entrepreneurs.com, and Elizabeth Wasserman’s Article on Inc.com amongts others, All seems to be insightful when setting customer price for products and services.
But I wanted more, I wanted more than just setting my prices based on my cost of production, market value, competitor’s price, etc… because it won’t stop customers from negotiating the price, and once they feel they are not getting a good negotiation they start drifting away from the brand emotionally, hence, they start losing interest in the brand and I want my customers to stay true to my brands (Your Brand).
I understand that every customer has a distinct perspective when it comes to the value and the price they are willing to pay for a particular product or service, and since my motive is always to meet and exceed customer’s expectations, I realized the best approach is to create different prices for different scenarios and make my customers understand that the only way they can have control over my prices is to get closer to my brand, the closer they get the less they pay and the more value they will get. Sounds interesting right?
I know my customers want to be in control of how much goes out of their wallet and I just discovered how to factor that into pricing, such that the more customers get closer to my brand the more control they have over my prices, in fact, at some point they get to decide how much other people pay for a particular product or service.
How to Build Brand Loyalty and Sales with the Customer Journey Price Set
Before we go further I know you must be wondering what customer journey price set is. The term never existed until now and like every new term, it exists to fulfill a need. It was the perfect word I could come up with that captures the essence of the customer price set strategy.
What is Customer Journey Price Set?
Customer Journey Price Set (CJPS) is a model of setting prices using customer journey and scenarios. With the customer journey price set model, customers pay different prices for the same product depending on their relationship with the brand. The more connected a customer is to a brand the more control and flexibility they have over the price of a product, they get to decide how much their friends can purchase the same products and how much new customers can purchase the product.
This model of pricing is fixed by the brand and flexible for the customers, it gives the customers a chance to get a particular product for almost no costs sometimes while the brand still makes a profit.
The model doesn’t just classify customers into new and old (existing) customers, it also attaches a value to the degree of loyalty your customers have as they transition from new to lifetime customers, and promotes product/service innovation by ensuring that you have something new to offer your customers and retain them as lifelong customers.
The Customer Journey Price Sets
This pricing model consists of 5 phases. This means five scenarios and five different prices for the same product or service.
Price Set 1: The Fixed Customer Price
This is the price you may want to print on labels or write on your website. This price is fixed and non-negotiable.
To determine your fixed price your most consider all price determinants and ensure your business objectives (profit) is met.
You need to set 2 points for your fixed price. the lowest point is the minimum price you can afford to sell the product or service at any of the other customer price set, while the high point is the perfect fixed price. This allows you to manipulate other price sets to fit into the range, anywhere from the lowest price point to the highest.
Price Set 2: Affiliate Marketing Customer Price
Customers want to associate with brands that have unique value propositions, especially if they stand to make a profit by doing so. An affiliate marketing price is the discounted price you are offering to people who want to promote your services. They help you market your product to their family and network of friends and in return, they get to keep a portion of the amount. This strategy will help you reduce marketing cost effectively, in fact, unlike most marketing strategy where you get to invest and hope for higher conversion, every penny you let go in form of a discount for the affiliate customer is a guarantee profit in sales for your brand because the affiliate only gets paid when you make sales.
For instance, if your fixed price is $80, your affiliate price could be $75. That way your affiliate customers can keep the $5 extra. Trust me, as much as every customer have to pay to get your product or service, they wish there’s a way they can keep some of the money back for themselves.
Price Set 3: Client Reward Customer Price
Customer Reward Price is the price you are willing to sell your product or service to customers who have previously purchased from your business. It’s a way of thanking your customers for patronizing you again and letting them know that you care about them by making them pay less than the fixed prices every time they purchase from you again. This is irrespective of what they previously purchased from you.
Price Set 4: New Value Proposition Customer Price
During my Enterprise Design Thinking course at IBM, I discovered that no product is ever perfect, brands need to keep reinventing their products and service to meet the ever-changing and un-satisfiable demands of customers. This demand is what keeps great brands like Apple, IBM, Google, and Coca-Cola on their toes, they need to consistently innovate new products, strategies, and services, and that’s how they maintain value and relevance in the minds of their consumer. If you aim to be a great brand you must set a new value proposition price for your customers.
A new value proposition price is the amount an existing customer needs to pay in other to benefit from an added value you’re trying to promote.
Let’s say you make aquariums that runs on electricity, but you later found ways to make aquariums that operates on solar energy and with more aesthetics designs. Instead of having your customers purchase the new product at the regular fixed price, you offer them a new value proposition price.
The equivalent in terms of service is called Customer Loyalty Service or complementary service. This is the service you render to your existing customers as an add-on or free service for patronizing your brand.
Price Set 5: Customer Relations Price
Customer Relation Price is the price any customer can pay for your product or service if they know anyone who has previously purchased the same product or service from you. This is an interesting strategy to also promote your brand through word of mouth. As I stated earlier, your customers can decide how much their friends and other customers can purchase from you.
If your fixed price is $80, and a customer walks into your store or order for your service, provide a feedback form to request who told them about the particular product and tell them there’s a discount if they know someone who recently bought the same product and that that if they refer someone they could get a commission also and the friend or family they’ve referred would be able to purchase the product at (lets say) $72.
Putting it all together – Setting Your Customer Price
Customers want the power to bargain a price that suits them even if it doesn’t meet your production cost, that’s why there’s always a struggle of who has the upper hand when negotiating. This can be frustrating for both business owners and customers. Hence the need for a strategic way to set price points that customers can decide on what to pay while businesses owners and brands can maximize profit.
To use this strategy you need to first set a fixed price (min and max), then decide how much you can let off that price when a customer refers another customer to buy the same product, how much you are will to let them have the same product if they’ve been buying from you before (existing customer), and how much you’ll let them have a product if they’ve purchased older versions of the product from you. (Which will be an effective means of marketing your brand via word of mouth).
Drop your comments below if you have suggestions or need to clarify something.