Perfect Pricing

Perfect pricing does not exist. But if it did, it would follow these 3 steps: 

1. Adopt Value-based pricing
2. Adopt price segmentation
3. Find mechanisms to charge each buyer what they are WTP. 

Step 1 is “easy”. Value-based Pricing (VBP) means charge what your buyer is willing to pay (WTP). To adopt VBP means to adopt the attitude or goal of getting closer and closer to charging what buyers are WTP. As you’ll see below, it’s not possible to be perfect. But you can get closer.  Adopt value-based pricing as an attitude.

Step 2 is easy to understand but hard to implement. Perfect price segmentation reads each buyer’s mind to learn their WTP so you can charge them that price. However, you probably can’t read a buyer’s mind. So you will end up categorizing buyers into groups and setting different prices for each group. The fundamental point here is it’s OK to charge different prices to different buyers based on their WTP.  

Step 3 is impossible. If you could read everyone’s mind, how would you charge each buyer a different price? There will be issues of perceived fairness. Costs of execution will get out of control. Salespeople negotiating prices is one way we charge different prices to different buyers, but that only makes sense on large deals.

OK, so you can’t price perfectly. What should you take away from this post? You can try! You can get closer! Commit to step 1. (Hopefully you already have.) Then regularly brainstorm steps 2 and 3. Figure out which customers are WTP more. Can you find a way to charge them more? What customers do you lose because you’re too expensive? Can you find a way to win them with lower prices without lowering your price to the other customers?  

Yes, perfect pricing is impossible, but you can improve. Each positive step you take gets you closer to perfect pricing.  

Now, go make an Impact!