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Customer-Driven Pricing – Strategic Pricing Based on Customer Knowledge

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The typical approach to set prices for businesses back in the day was to employ cost-plus pricing. This method calculates the price by adding all the costs connected with developing and delivering the product together before incorporating the target margin.

However, perceived value, not financial costs, motivates consumers to purchase. With the ease with which corporations may get client data over the internet today, more companies are embracing customer-driven pricing to set their prices correctly. But what is it? And how can it help you?

Why Is Customer-Driven Pricing Effective?

What do customers anticipate to pay for a product after they grasp its unique value? What price are they prepared to pay for it? Consumer-driven pricing is effective because it focuses on the customer rather than the product. You determine your price based on the customers’ expectations, not the cost of production.

Customer-driven pricing works because it aligns actual market conditions with price settings. It considers what the particular client is willing to pay and the current market conditions, demand, and competition.

Know Who Your Customers Are

Customer-driven pricing requires a thorough understanding of your customer. Create a complete client profile that includes not only demographic information but also attitudes, values, and behaviors.

The customer’s problem is an essential aspect of this profile. This is a pain point that your solution must solve. The perceived value of your offering is determined by the extent to which you can address the customer’s issues. Showing the buyer how your solution solves their problems and improves their lives is the key to selling.

Other Options for Adding Value

There may be other forms of distinctive value that your product provides in addition to helping customers to overcome challenges. It could, for example, provide price flexibility. While your competitors only offer one version, you offer a range of variants at various price points, allowing customers to choose the best option for them.

You might provide thorough post-purchase technical help that your competitors don’t. Although this isn’t a feature of your product, it nonetheless aids clients in solving their difficulties.

The Challenges of Customer-Driven Pricing

To construct your customer profile, you’ll need to engage with your target audience and solicit comments to use this information to decide the appropriate price. One issue is that people aren’t always forthcoming about their willingness to pay. To see what products are selling at what price points, you must integrate customer data with objective sales data.

Another issue is that if you base your pricing on your clients, you may be pricing too low and, subsequently, losing money. People, understandably, prefer to spend less than to pay more. By increasing your marketing and presenting your product for its distinctiveness, you can charge more for your products.

Providing Real Value

Customer happiness isn’t the goal of customer-driven pricing; instead, the goal is to provide the best value for you and your customer. Pricing should be based on the customer as a method to start a conversation with them. You should monitor customer experience and satisfaction on an ongoing basis to make modifications as needed.


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