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Pricing Psychology: Different Kinds of Pricing Strategies

Though it would be nice to have a crystal ball, we can't be sure how the market will ebb and flow. While history can guide us, the market is a living, dynamic entity — now more than ever. When the competition turns on the pricing pressure, you don't want to have to resort to expense cutting, hiring freezes, or even layoffs. There is another way to address the ever-evolving marketplace. It's called strategic pricing, and we can help. 

What the experts say on pricing strategy

You've set up a pricing structure. You're hesitant to adjust it because it could have negative consequences for you or your customers. You are getting pricing pressure from the competition and yet you cannot lose revenues. You have to cut costs or protect your revenue. At the same time, you need to be loyal to the customers you've made commitments to. Working with numerous companies on go-to-market and pricing has taught CMG the importance of adapting. Just as the market is constantly evolving, so can you.

You don't have to lower the price 

At CMG, we understand how easy it can be to become a prisoner of your past behaviors and decisions. Many subscription service companies, such as wireless carriers and broadband providers, find themselves lowering prices over time to remain competitive.

They look to alternative revenue sources to compensate for lower amounts of money coming in from users. The typical ways companies respond to this dilemma:

  1. Give more product or service for the same price that was previously charged for a lesser product or service. 
  2. Lower prices to respond to competitors, sacrificing unit or revenue growth to maintain market share.

While these are the most common solutions, there is a third, highly advantageous strategy that most companies neglect to pursue: lowering prices strategically to shift your loading mix to the higher-end of your service portfolio. This approach serves to actually increase average revenue and may allow incremental loading growth as well. We've helped several companies do this successfully. 

One wireless carrier we worked with was able to increase overall sales by making these adjustments:

  1. Adding in more value (minutes, data, texts, etc.) on the low- and mid-tier plans without cutting prices to the levels of the competition
  2. Lowering prices at the top of the rate card to drive the mix of higher plans

Find out what works for you. Read about two cases of companies that raised revenue without lowering prices across the board.

Use strategic pricing as a catalyst for growth. Let your competition worry about keeping up. 

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Sources:

Small Business: http://smallbusiness.chron.com/definition-pricing-strategy-4686.html

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