Is taking a good hard look at the way your organisation prices its products and services one of the many items on your end-of-year To Do list?
The bulk of Australian business leaders will likely answer in the affirmative but definitions of what a good hard look comprises are likely to vary considerably.
For many enterprises, it may simply consist of examining the cost of their inputs – increasing across the board at a healthy clip in today’s inflationary times – and hiking up prices accordingly, to as high a point as they believe their customers will bear.
Rinse and repeat at regular intervals and you have what can pass as a pricing strategy.
If this sounds like the way things roll in your business then rest assured, you are far from alone.
Reacting to the market
Historically, reactive approaches to pricing were very much the order of the day. Businesses reviewed their costs and prices at regular intervals and when they reached inflexion points – think mergers and acquisitions, new product launches or the arrival of a competitor determined to capture market share by sharpening their pencil – and for the rest of the time it was business as usual.
The trouble is, in today’s dynamic commercial landscape, this modus operandi will no longer serve your organisation well.
That’s because the way businesses and consumers want to purchase and consume products and services is evolving rapidly. Suppliers need to evolve apace; anticipating those changing demands and adapting their offerings and pricing strategies to ensure that whatever it is they’re selling is exactly what people want to buy.
Consumption based pricing and subscription sales
The exploding popularity of the sharing economy, for example, has demonstrated that paying to access or use products and services can be just as good, if not better, than owning them outright.
Hence, we’re seeing long established, traditional businesses experimenting with the sort of subscription and consumption-based revenue models which have long been the norm in the utility, telco and cloud software sectors.
They include manufacturers of big ticket medical devices and suppliers of heavy equipment like John Deere, the iconic US tractor manufacturer. Several years ago, the latter identified an opportunity to shake up the agriculture industry with a range of subscription and sharing initiatives.
In the challenging economic times we’re currently experiencing, it’s a model that can hold especial appeal for customers of all stripes, courtesy of the fact it enables them to eschew large capital outlays in favour of only paying for what they use or need.
Preparing to pivot
Regularly evaluating your revenue model and pricing strategy will help ensure your business isn’t caught on the hop by customers’ changing preferences.
Taking a data driven approach is the smartest way to proceed. Using data analytics tools to investigate purchasing and payment patterns, and market research to flesh those figures out into a fulsome picture, will ensure your leadership team is alive to the way the market is evolving.
Armed with those insights, you’ll be ready to pivot to a new revenue model, or models, at precisely the moment it makes sense to do so.
Tools to support every type of pricing model
That’s always providing you have revenue management technology in place that enables you to bill customers promptly and accurately for the products and services they acquire or access, however they happen to acquire or access them.
We’re talking cloud-based revenue management software – the killer app in your ICT stack. Smartly implemented, it will swiftly prove to be critical digital infrastructure; enabling technology that offers comprehensive quote-to-cash support for whatever pricing model, or models, you decide to pursue.
And if you invest in a revenue management platform that connects seamlessly with your CRM software, you’ll be able to monitor the popularity of your pricing model and generate actionable insights that can be used to modify your offering for maximum customer appeal.
Striving for a stronger future
The upcoming year will be a challenging one for Australian businesses, as inflation and rising interest rates continue to impact on demand and margins.
For those aiming to survive and thrive, maintaining a fit for purpose pricing strategy will be essential and being able to adapt it quickly and easily, critical.
With the right revenue management platform in place, you’ll be well placed to do both. If profitability and growth are priorities for your business in 2024, it’s likely to prove an essential investment.
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