Too many businesses decide on prices of a new product or service without having a sound plan in place. This error may be costly and can harm the product’s market standing. Hence, it is crucial to have a wise pricing strategy as it will strengthen your market position, foster consumer loyalty, and guarantee that you achieve your business’ goals.
What is Go-To-Market Strategy (GTM)
Go-To-Market (GTM) Strategy, as its name suggests, is a shorthand for an action plan on how to market a product. It may not always involve tangible goods; it can also refer to brand-new services that a company wants to offer. It explains how a company acquires, maintains, and expands its consumer base.
The same go-to-market strategy (GTM) cannot be used to promote every product on the market because it is not a universal plan. It is a comprehensive, tailored, step-by-step plan that is made for each unique product or service. By using the correct GTM, you will be able to launch and promote your product or service to the right people, with the right message, at the right time.
A typical GTM strategy essentially consists of four components:
1. Target Market
2. Value Proposition and Product Messaging
3. Pricing Strategy
4. Sales and Distribution Strategy
3rd Step of GTM – Pricing Strategy, What is it?
Pricing is referred to as the sum of money you expect in exchange for your goods or services. Your pricing reflects the value you set on your company’s name, its products, and its consumers. It’s the main factor that can influence people’s decision to buy or not. It must, therefore, be meticulously determined.
Why is Pricing Strategy Important?
Price is not just a mere number, it carries a perception and influences the consumers’ buying decision.
1. Represents value
The price reflects the worth of your goods. Some consumers could assume that products with low pricing are of low quality. On the other hand, a premium price may indicate good quality yet turn away clients. Pricing tactics aid businesses in striking a balance and taking into account customer preferences.
2. Draw in Customers
The first impression that customers have of your brand is likely influenced by price. The right pricing persuades customers to select your product over rivals’ offerings.
3. Helps to Meet Expectations of the Consumers
To match customer expectations and keep ahead of the competition, businesses can switch up their strategy or combine different techniques. Companies can predict how customers and competitors will respond to a new price by conducting thorough research to satisfy expectations.
4. Profit Determination
Establishing sales profits and revenues depends heavily on pricing. It may help to increase consumer loyalty and boosts sales.
How to Develop a Successful Pricing Strategy?
There are 4 steps in developing a Successful Pricing Strategy:
1) Determining the price range
2) Determining your value metric
3) Setting your target audience
4) Completing user research and experimentation
1. Determining the Price Range
Step 1 of determining the price range is just simply deciding if your goods/services are going to be in dollars, or in tens, hundreds or thousands, etc.
2. Determining Your Value Metric
In essence, what you price for is a “value metric.” For example, in a cinema they charge per seat, some dentists charge dental cleaning based on the time they spent. In these contexts, the seat and the time spent are the value metrics used.
To determine your value metric: Consider the ideal worth for your product. What benefit are you giving your customers directly?
In the business-to-business sector, it could probably be time, money, or both saved or gained. In the direct-to-customer sector, it may be the happiness you provide people, physical fitness attained, improved effectiveness, etc. Of course, we can’t measure them all, but if you can and your customers believe in your measurement, that’s your value metric.
3. Setting Your Target Audience
Identifying your target market and ideal client profile is the third crucial step in developing your pricing strategy. If you are following through the Go-To-Market Strategy, this would be your first step.
You can make your choice with the help of the demographic, psychographic, geographic, and other aspects. You also need to choose your ideal target market and create buyer personas. Selecting a market that will provide you the best opportunity of domination and expansion is important. But if your market is very large, you can find yourself having to compete with more established markets that have access to a wealth of resources.
4. Completing user research and experimentation
The pricing game gets quite sophisticated and research-based after you move beyond your value metric. When determining your price point, you must first conduct research on those markets before making a final choice.
Since converting your value into the best possible framework for your target customer groups is at the very heart of pricing, it is never truly complete. Practically speaking, this is the reason you ought to try new pricing strategies every three months. Remember, always experiment and measure; carry out the strategy and measure throughout.
In our next article, we will be discussing the common pricing strategies used by businesses and what are the factors that influence your choice of pricing strategy.