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Why Your Pricing Strategy is the Key to Customer Success

 

This post comes in the wake of Customer Success 2012, an event we've been asked to be a part of to debate the key drivers of customer success. We're honored to represent the world of pricing.  

We champion pricing here as the most important aspect of your business. After all, 1% of price optimization results in a boost of 11% in profits. That's huge and unmatched by any other part of your business, including increasing volume.

Yet, in all our pricing and value revelry, it seems we've started a battle that rivals the great debates of Lincoln and Douglass (or Romney and Obama for our contemporary readers). It seems that some feel user experience, clickstream analytics, or an engaged user community drive more success than an effective pricing strategy. Of course, these concepts are not mutually exclusive, but we're happy to announce we're having a great debate on November 29th that you can attend in Boston or online through a live stream. We're ready to settle the score and defend pricing's seat at the table for measuring and driving customer success.   

In the mean time, we're going to lay out the two main planks in our platform for pricing being the key indicator of success. Feel free to add to the argument (or detract from it) in the comments or at the event with pointed pricing questions.     

True measure of customer satisfaction

Pricing and customer value data is the leading indicator of how much your customers or potential customers actually value the solution you've created. Everything else, including user experience, analytics, etc., support the number you're putting down in pixels to charge your customers every single month. Yet, no amount of marketing, design, or the like will matter if your prospects can't get past their first month of being a customer, churning out and sending your value plummeting.   

The secret becomes measuring the value you're providing your customers and moving your pricing model to a point where every unit of value you provide equates to the price your target customers are willing to pay for that value. Yes, this is the holy grail for a company, and yes, this doesn't happen overnight (pricing is a process). But, measuring your customer satisfaction based on "happiness" or nebulous things like net promoter scores won't get you anywhere. Your customers are paying for your value, but you can only measure that value in the form of dollar bills. After all, that's what they're exchanging for your value and the only cell on your spreadsheet that truly matters each month.   

Value information tells you what customers want

The beauty of software resides in our ability to create almost anything and everything. The horrible part of software resides in our ability to create almost anything and everything. The simple fact is when you're not taking your customer's needs and wants in mind, you end up with frankenstein monsters of products with little to no direction and an unenthusiastic customer base.   

How do you determine what your customers want? Well, you can run interviews, track their behaviors, or assess their needs based on your gut feelings…or you can actually ask them in an educated manner. Most product managers aren't putting their target customers in a position to make value based decisions about new features. Take a look at the output below. You have no idea what feature should be built next, because customers will want everything if you present them with the opportunity to indicate they can have everything.   

featureanalysis resized 600

Instead, you must present them with the opportunity to make tradeoffs, which results in true value based information, indicating what should be built next and what they actually care about from the next aspects of your product. Take a look at the output below. From here, you know where you're headed, because your customers have indicated what's important and what's not (for more on the process behind this analysis, check out our pricing strategy ebook). 

customervalue resized 600
Pricing is key, but analytics, UX, and community are too

Overall, we realize that customer success cannot be defined by one particular aspect of a business. The interplay between analytics, UX, feedback, and value all remain crucial. Yet, understanding your value is synonymous with understanding your customer, because value is integral to why your customer cares about who you are and why you're trying to get them to use your product. Think of value as the foundation that you build retention, evangelism, and happiness on. With this frame of reference, you're able to see that you're not always paying attention to the foundation, but it always needs to buttress everything else. 

To learn more, check out our Pricing Strategy ebook, our Pricing Page Bootcamp (it’s free!), or learn more about our price optimization solutions.


Comments

Great article! I work for Fusebill, a recurring billing service and we see every day that in the subscription economy pricing strategy truly is key. Looking forward to the debate. 
Posted @ Monday, November 19, 2012 8:50 AM by Tara Landry
Great insight! I hope you're ready for a kicking debate on Thursday! :)
Posted @ Tuesday, November 27, 2012 10:14 PM by Patrick Campbell
Great post for too many reasons to cite here. I'm sure our paths will cross in the future. 
 
Anderson Miller 
@tuxmiller 
@agencyprofits
Posted @ Tuesday, December 04, 2012 9:35 PM by Scott Miller
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