Pricing and Value Communication Does Not End at the Sale

When do you think about pricing?

That probably depends on your function.

In product development? We hope you thought about value and price before you committed to designing your solution.

In marketing? Pricing is part of your value conversation. Establishing differentiated value for targeted market segments is central to marketing.

In sales? Negotiating price is part of the sale

In finance? Price is a critical factor in margins.

Does it stop there?

Not if you are managing a subscription business. In a subscription business, where you are dependent on renewals for a successful business, you have to continue to connect price and value through implementation and customer success. In subscription business models, customer success is not just customer support. Customer success means making sure that you deliver on your value promises.

Value needs to be created, communicated, delivered and then part of that value captured into price all around the value cycle.

It is a cycle because it repeats. Pricing is not once and done.

The value cycle rolls all the way along the customer journey.

Of course there are many possible customer journeys. Different personas interact with a solution in different ways. One way to organize the customer journey is a path from Awareness, through Consideration, Trial and Commitment, to Expansion and Renewal.

Let’s look at how value and pricing play across the customer journey.

Awareness: You may be surprised to see Value Creation showing up at the awareness stage. But this is critical. Creating awareness is closely connected to creating value. Value does not just come from your product or service. All of your communications need to create value for the key stakeholders in your market. Of course that value should connect to the differentiated value of what you are selling.

For each marketing communication, ask yourself what value this is creating and who it is creating it for.

Consideration: You have a buying opportunity when ‘awareness’ and ‘consideration’ occur in the same mind at the same time. During consideration, it is important to do more than just communicate value. You need to start delivering it one way or another.

Trial: Most software solutions today include some form of trial. This is often some form of free or freemium offer, but it can also be a paid pilot or, in service-led growth, be wrapped into a consulting engagement. It is absolutely critical to both deliver and document value in the trial. This will inform all of the go forward value promises and shape the price. Design your trials to gather the information needed to make value claims. Let these claims inform how you communicate price.

Commitment: The commitment phase generally covers the final negotiations and contracting, but it goes beyond that. Commitments go two ways. The vendor is committing to deliver the promised value.

Expansion: Once you have delivered value, documented it, and communicated this back to the customer, you are well positioned to expand use. With usage-based pricing, this expansion can come naturally. Especially if your usage-based pricing design connects back to value. See Ibbaka’s work on usage-based pricing.

Renewal: Subscription pricing models rely on a high renewal rate. Customers will only renew if you have delivered on the value promised during the commitment phase. The value needs to be documented over the course of the month or year of the subscription.

The value cycle continues to turn across the customer journey. To grow revenues, increase renewals and drive up lifetime customer value you need to constantly frame your pricing in terms of the value you deliver.

More on Usage-based Pricing

Implement Customer Value Management with the Ibbaka Value Pricing Dashboard

Value-based pricing 2.0 goes beyond ringing the sales bell