Here in our third piece on Ways to develop your Pricing Strategy, we look at Client Pricing and Discounts. We have covered Up-selling & Cross-selling and Bundle & Volume pricing in our last two articles.
To ensure the best possible results with all CPQ Strategies, it is vital to ensure your business, your staff and your customers all benefit from their implementation.
Repeat customers are incredibly valuable
Repeat customers or clients are incredibly valuable. It is a costly and time-consuming process to get a customer to buy for the first time.
It is generally understood to cost 4 – 10 times more to acquire a new customer than to retain an existing.
So once you have secured a customer, you want to retain them and encourage repeat business as much as possible to drive profit and ROI.
Client Specific Prices
Offering a customer, a special price specific to them assist retention. Improve customer relationships by making them feel singled out and valued.
It will often encourage them to place larger orders or purchase more often as well.
The great thing about Client Pricing is, by its very nature, it is set and tailored to best suit the customer – in line with your business goals.
For example, you could set a reduced price on the products or services your customer buys regularly, making them see even more value in the reduced price. Their other purchases can still be at standard price, but the discount on a product they buy regularly could ensure you retain their business and loyalty as well as drive profit and ROI from the customer.
Long-Term Discounts
When used as a long-term strategy discounting can sometimes be detrimental to your brand and customer perception. Think about furniture shops that are always having a 50% sale, as consumers it makes us think that we aren’t actually getting a deal or good value, just that the products are only worth 50% of the list price anyway.
Consider your product positioning and whether a long-term discount is sustainable or if you are just reducing the perceived value of your products or services – as low-cost often means low-quality.
Also, customers are increasingly savvy – if you do long term or very regular discounting they will tend to wait until your next discount offer and you will struggle to sell at list price.
A business wide, discount pricing strategy, should generally be promoted in the short term with clear goals such as driving awareness, traffic, sales and profit.
Discounts used effectively
Off course, a discount on individual products or entire orders can help in progressing a sale and closing a key deal.
Much like Client Prices, Discount Strategies are most effectively used when they are tailored to the customer, their budget and their requirements.
Ways to effectively use discounts include:
- Reward customer loyalty
- Close deals (where appropriate)
- Competitor advantage
- Create brand loyalty by offering a discount on their next purchase
- Promote products or services short-term
- Move older or excess stock
Ideally, your CPQ system will allow you to discount by percentage % reduction or by amending the price of a product or whole order.
This way sales teams can effectively discount to meet the customers individual needs and management can monitor and control the process to ensure margins are maintained at the level the business dictates.
Ultimately customers want to know they’re saving money.
If you can offer a client a percentage % discount or reduced price for their order, that’s also appropriate and maintains business profit levels, this can help reduce any doubt or price concerns for the customer and close the deal for the business.
Win Win.
Join the conversation
- Have you utilised Client Pricing in your business?
- How do you find discounts are used most effectively?
- Any other thoughts or questions – please comment below
