The Tricky Proposition of Value-Based Pricing
Communicating a Price Adjustment to Your Customers
Entering conversations about price increases is never easy. If we communicate poorly, we risk undermining our relationships, reputation, and desired results. If we communicate well, we can optimize the value exchange and strengthen relationships.
Customer reaction to a price increase comes down to their beliefs. Do they believe the price is justified? Do they believe the price is fair?
When we communicate with customers about a pricing increase, we must ensure our rationale aligns with what they value. Some best practices include:
- Arm the sales team with robust data and analytics on the why behind any change.
- Design and customize communication-based on product-specific attributes and price points.
- Anchor the conversation in the context of value amid the current macroeconomic environment.
- Provide insights, scenarios, and potential impacts (including benefits) for consumer economics.
Value-Based Pricing: Bringing it All Together
Joan brought her pricing questions to her C12 Business Forum for peer counsel. Based upon input from her peers, she realized that Greenwood offered “rest and retreat,” not just a “bed to sleep in.” Rest and retreat are of incredibly high value to her customers. And she realized it was good stewardship to base her prices based on what her customers valued—not just cost or competitive analysis.
Further, by under-pricing her rooms, she was leaving money on the table. Lower profits meant she was unable to bless her employees with the higher wages they deserved and to bless the causes she cared about. As we say in C12, “No margin, no mission.” Joan decided to increase pricing based on the input of her peers.
In an inflationary market, companies that base prices on cost and competition are under threat. To be good stewards of God’s resources in these times requires us to provide high value, know that value, and communicate it well and consistently to our customers.
Well-positioned value-based pricing will allow us to provide a flourishing work environment and advance our mission sustainably.
At C12, we provide Christian business leaders, CEOs, and business owners with the business tools, peer advisory groups, and executive coaching they need to thrive in business and life. To learn more about C12’s approach to Christ-centered business leadership, find a C12 Business Forum near you.
November 15, 2022