![]() ![]() So how do you select a price that's attractive to customers and profitable for your company? This tool will help you confidently arrive at the most profitable price-by guiding you through a series of questions: How much does it cost to produce each product you sell? How are your competitors' products priced, and how valuable is your product or service relative to those competitors? How many customers will buy your product at various price points? What price maximizes your profitability? HBR's Pricing for Profit will help you turn your raw data into a clear analysis that will inform your pricing decisions. Your new product launch or marketing campaign's success-perhaps even your career advancement-may hinge on the price you choose. And drivers with clean records want to be rewarded.What price is right? Figuring out the best price for your product or service can be nerve-wracking. Price does matter, it learned, but there’s more to the story: Many drivers worry about being hit with premium hikes if they’re in an accident. But in the early 2000s Allstate conducted some research that caused it to revisit that assumption. Key steps include identifying “fence” attributes that will prevent current customers from trading down from the existing offering carefully choosing features and names to create clear differentiation and value and setting prices using feedback from in-house experts and, when possible, drawing on market research.įor decades the auto insurance industry operated on a simple assumption: Consumers are highly price-sensitive, and most will buy the least-expensive plan they can find. ![]() The SolutionĪ multitiered offering (typically with three options) can use a stripped-down product to attract new customers, the existing product to keep current customers happy, and a feature-laden premium version to increase spending by customers who want more. Key steps include identifying “fence” attributes that will prevent current customers from trading down from the existing offering carefully choosing features and names to create clear differentiation and value and setting prices using feedback from in-house experts and, when possible, drawing on conjoint analysis and other market research.Ĭompanies often crimp profits by using discounts to attract price-sensitive consumers and by failing to give high-end customers reasons to spend more. ![]() The author, a consultant who has helped many organizations adopt G-B-B pricing, presents a step-by-step guide to devising, testing, and launching the strategy. There’s nothing new about this concept, of course-think of the different grades of fuel at any gas station and the varying packages marketed by cable TV providers, to name just two examples-yet many companies and industries have failed to embrace it. A multitiered offering can use a stripped-down product (the “Good” option) to attract new customers, the existing product (“Better”) to keep current customers happy, and a feature-laden premium version (“Best”) to increase spending by customers who want more. Companies often crimp profits by using discounts to attract price-sensitive customers and by failing to give high-end customers reasons to spend more. ![]()
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