Digest...

Mistake No. 1:
Basing prices on costs, not customers’ perceptions of value.

Mistake No. 2: Companies base their prices on “the marketplace.”

Mistake No. 3: Same profit margin across different product lines.

Mistake No. 4: Companies fail to segment their customers.

Mistake No. 5: Companies hold prices at the same level for too long.

Mistake No. 6:  Salespeople incentivized strictly on revenue.

Mistake No. 7:
 Changing prices without forecasting competitors’ reactions.

Mistake No. 8: Companies spend insufficient resources managing their pricing practices.

Mistake No. 9: Companies fail to establish internal procedures to optimize prices.

Mistake No. 10:
 Companies rely on salespeople and other customer-facing staff for pricing intelligence.

► Receive a FREE daily summary of The Marketing Technology Alert ◄          

Digest...

1. Raise the price, and let that price speak for itself.

A high price, in and of itself, can help the user to convert. Here’s why. When a user sees a higher price, she automatically thinks that a higher price equals a higher value. Marketing researchers have identified three main things that people look for when they buy: 1) Price, 2) quality, and 3) value, in that order.

Here’s the funny thing, though. The price level influences the other two factors. Since price is the first consideration in a purchase decision, it affects the remaining two factors of the decision. So if the price is low, the user thinks that the quality is low and the value is low. If the price is high, then the user thinks that the quality is high and the value is high. Scholarly studies have affirmed this higher price/higher value correlation.

˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅˅

Receive a FREE daily summary

of The Marketing Technology Alert.

Subscribe here: goo.gl/xSjgGT 

(your privacy is protected).

˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄˄

2. Give users a free trial.

Common sense tells us that the free trial model is a good idea, and the scholarly studies confirm it. Not only does it help conversions happen, but it also “has an impact on post-trial beliefs and attitudes” according to a study in Information Systems and e-Business Management.

3. Put trust signals everywhere.

Trust signals are an essential part of helping users to make big conversion decisions. You need trust signals everywhere.

4. Provide live chat.

A live chat team should be on hand during normal business hours to answer questions, respond to concerns, and help persuade users to convert.

5. Identify your Common Conversion Activities

One of the more advanced techniques to improving conversions for big deals is the CCA metric — common conversion activities: “The things that all or most paying customers do during their trial.” A more advanced definition is “a set of story-driven actions defined by falsified hypothesis that, when completed as a set during the trial, lead to conversion.”

The CCA is a metric, but it’s not a financial one. This may seem counterintuitive, since your goal is to improve revenue due to conversions on high-priced purchases. What the CCA does, however, is takes the focus away from the financials, which are secondary, and on to the product, which is the primary concern of a high-paying user.

Digest...

Companies can see massive performance increases through constant A/B experimentation if done correctly.

One key element to test is price. Steven Sinofsky, a board member at Andreessen Horowitz recently wrote that, “Nothing is more critical to a software-as-a-service (SaaS) business than pricing strategy.” I totally agree and experimenting is a key piece of pricing strategy. Testing things like how price is displayed, amount to charge, and how often is all part of the puzzle.

For companies with a sales team, A/B experiments on price brings up three key questions:

1. How will sales know which price a lead saw?

2. How can we know what price they are going to see if they haven’t visited the pricing page yet?

3. How will we make sure everyone at the company sees the same price?

__________________

► Receive a FREE daily summary of The Marketing Technology Alert directly to your inbox. To subscribe, please go to http://ineomarketing.com/About_The_MAR_Sub.html  (your privacy is protected).

Having a small pricing differential between your mid-tier and top-tier offerings and offering other valuable benefits with the top tier can be a useful strategy to entice customers to choose the top-tier option.

Digest...

Flickr’s competitors – many of which have offered unlimited storage (with minor restrictions) for years – might be wondering why Flickr got attention for offering an amount of storage that is technically less than what they provide.

Flickr likely adopted this strategy by offering a “very high” level of benefit, which people perceive as more valuable than an “unlimited” benefit.

Let’s look at how you can apply this psychology to business-to-business offerings. Think about product or service benefits you offer at an unlimited level, such as unlimited lifetime replacements, unlimited 24-hour customer service or unlimited user accounts. Consider instead offering a very high limit, such as up to 500 replacements over the unit’s lifetime or up to 5,000 user accounts. Granted, some customers will likely do the math and realize that they will never take advantage of the full benefits. To avoid backlash, you can apply benefit levels with a tiered pricing strategy.

Having a small pricing differential between your mid-tier and top-tier offerings and offering other valuable benefits with the top tier can be a useful strategy to entice customers to choose the top-tier option.