Most conventional businesses don’t often think about pricing models. They look at the competitive landscape and charge a price that is in the range of others. As long as we are competitive, we can win the day with our charm and classic good looks.
Sorry Don Draper that isn’t going to work today.
Unbundling Prices
Brands need to look at unbundling prices to find a competitive edge. When the airline industry decoupled the cost of your luggage from the airline ticket, profits soared. Airlines like Ryanair and Spirit charge you for breathing their oxygen – well, they charge for every tiny thing you do like bringing a bag online.
The marketplace is forcing cable companies to move in this direction. Soon you’ll pick more of the channels you really want. Buy what you want – what a novel idea? More cellular services are popping up offering pay for what you need service plans or, no plan at all. Your pricing may be outdated and causing you to blend into the sameness of the category. A refreshed approach to your pricing policy could alter the course of your growth curve.
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Ask yourself these simple questions about your pricing model:
- Why did you build the pricing model you currently use?
- Was it a consensus choice or happenstance?
- Instead of building services into the pricing, could you reduce your price to customers by taking away unwanted costs?
- Could you create a more a la carte menu instead of a fixed price meal?
- Could you create a good, better and best approach where the good pricing provides Spirit Airline value for those who only want low prices?
- Could you differentiate yourself from your competition by giving pricing ranges and allow customers to buy what they need?
- Is there a company you admire that you could model your pricing strategy after? Think of Netflix subscription or Apple Care.
- Could you give away your product for free or at a deep discount but make it up the loss in alternative revenue streams derived from those customers? Costco makes about 75% of their profits from club memberships and 25% from the sale of goods. Think about that idea for your business.
The Next Step
Get your key team members together for a brainstorming session. Ask everyone to bring to the meeting one new pricing model idea based on how another company in another industry does business. Use the session to allow your team to think outside of the category. Use the phrase “what if” a lot. Don’t criticize, just capture every idea. Then assign one person to put together a straw man idea that would radically shift your business price structure.
Maybe it is time to untie the bundle.
Need help getting unbundling your pricing model? Let’s take a scissor out and cut through the knots.
