Pricing strategy is not about pricing products
Sure, there is a price tag on every product and service. But, when we look at pricing strategy through a jobs-to-be-done lens, we see that customers aren’t paying for products. They are paying to get a job done. If we know what customers are willing to pay to get a job done well and how well a product helps get the job done, we have the two key inputs we need to formulate an effective pricing strategy. With a jobs-to-be-done perspective, we have created and patented a whole new way to determine the value of a product and how to price it.
Myths that mislead
Companies think that customers are paying for products, but they are not. This is the myth that misleads. They are paying to get a job done. Consequently, companies should stop asking their customers what they would pay for a product. It is the wrong question to ask, and a question customers can’t answer.
When companies ask customers to say what they would be willing to pay for a product, companies are asking them to figure out how a new product, technology, or feature set is going to help them get a job done better and by how much, and then to translate that improvement into a fair price. This is simply too much to ask.
Pricing strategy challenges
When trying to figure out how to price a product, the most important question to ask is, “what are customers willing to pay to get the job done perfectly?” For example, a patron may be paying $50 every time she visits the hair salon, but she might be willing to pay $100 if she could find a salon that would deliver perfect results.
This raises the next question: what does “perfect” mean and how do we know if a product helps customers get the job done perfectly? To answer this question, we need to know the degree to which a product satisfies all the customer needs associated with getting the job done. Unfortunately, in nearly all companies, managers can’t agree on what a customer need even is, so of course they don’t know all of them. So how can they determine the degree to which a product satisfies all the customer needs? They can’t. And this is the problem that we solve.
Customer satisfaction drives pricing strategy
Our pricing methodology works because it is built around a solid definition of what a customer need is. We have discovered that customers consider between 50 and 150 metrics (their desired outcomes) when assessing how well a product or service enables them to successfully execute any job. These metrics are the customer’s needs. They power our innovation process, Outcome-Driven Innovation (ODI).
By assessing how highly a product rates in these metrics, we are able to determine the degree to which a product satisfies all the customer needs. With this insight, we can price a product right. Learn more about how we can help you price your products right with our growth strategy consulting services.