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Are customers are unwilling to try your product ? Use these pricing tactics

Last month I went our for lunch with a friend to a new Italian restaurant in the neighbourhood.

The place was done up very nicely. The walls has thoughtful paintings, the furniture looked classy and the staff was friendly. The menu design seemed artistic. To top it all, the food was also good and the prices were well within the rage of what you would expect from such an establishment.  Continue reading Are customers are unwilling to try your product ? Use these pricing tactics

Freemium of free trial. Which is better for you?

Many software companies offer software-as-a-service. In order to attract the customers these companies use freemium or free trial strategy.

What is the difference? In freemium model you offer a limited version of free software for unlimited time and hope that the the customer will see value in the extended features that the paid version has to offer and accordingly upgrade. In the free trial model, you offer a full version of the product for limited amount of time. Here the belief is that in the limited period the customer will see enough value in the product and buy it. Continue reading Freemium of free trial. Which is better for you?

Five secrets to arrive at right price metric

In the late 90s, there was a curious phenomenon. Many well off people owned mobile phones, but they used it sparingly.

The main reason for this behaviour was that incoming calls were charged. Unless the call came from some known person, it simply was not picked up. It took a government notification to do away with the charging of the incoming calls. This event, in my view, singularly caused the telecom revolution in India that is for all of us to see. Continue reading Five secrets to arrive at right price metric

Communicate value to command price premium

Last month the press reported that Gujarat Cooperative Milk Marketing Federation, the owners of Amul brand were sued by Unilever for claiming that unlike others they used real milk in their ice-creams.

The merits of the case aside, it points to the well know marketing rule that you need to communicate about benefits of your product. A good product sells by itself, is at best an exception and at worst a myth. Continue reading Communicate value to command price premium

Don’t worry. We will make up in volumes. Really?

This will be a short post.

Let me begin with a question. “If you decrease the price of a product by 20%, how much additional volumes do you need to recover the loss of profit?”. Go on. Give it a try.

If your answer is 20%, then you are not alone in underestimating the gravity of the issue. While the answer depends on the exact cost structure of a company, for a typical company, as the following table shows, you need to double your sales to keep the profit at the same level. Continue reading Don’t worry. We will make up in volumes. Really?

Credibility issues with discounts

This story is partly funny and partly sad.

A few years back, I was advising an industrial company on their next generation technology initiative. As a part of the plan, the client needed to buy some servers.  The project sponsor promptly invited a large IT company, whose name I shall not disclose. The meeting was productive but the client representative decided to hold back on purchase. On my probing, he disclosed that he bought all the IT equipment at the end of the quarter. That is the time when he got maximum discounts as sales people were in a hurry to meet their quotas.

Continue reading Credibility issues with discounts

When is the right time to unbundle your offerings?

Once taken for granted, the domestic plane tickets do not come with free food and multiple option to change your plans.

These days, we not only play for them separately but also for other conveniences such as extra leg room. Effectively, what has happened is that airlines have unbundled their offering and have begun to offer a-la-carte pricing. So the question is when is the right time to move away from bundles to a-la-carte. Continue reading When is the right time to unbundle your offerings?

How to bundle like a pro

A few years back, buying a mobile plan used to give a measure of anxiety bordering seizures.

The menu would be a few pages long with high doze of options with base rates, pulse rates, time of day among many other such items. The buyer was free to make any number permutation and combination from the menu.

One needed to be an adept mathematician to run a mental optimisation algorithm to find the best plan. Since I am anything but, I would go by the advice of the retail agent. And for the next few days, I would regularly get pangs of regret for missing out on that mysterious best plan.

Though I often sought counselling from my friends who were experts in these matters, their elaborate methods for plan selection barely registered in my mind. Continue reading How to bundle like a pro

What is the right price for your product? Start from value based price

“ It is monsoon sir”, he said with a measured calmness.

I was at park street in Kolkata. It was Sunday afternoon and the place was abuzz with shoppers and hawkers. The road-side vendor did not doubt my knowledge of the season. He was reacting to my disbelief, when he quoted Rs. 300 for a small umbrella. This man clearly understood value based pricing. Continue reading What is the right price for your product? Start from value based price

Price : The most unexploited profit lever

A few weeks back, the morning business paper solemnly informed me that Amul milk would be dearer by Rs. 2 per litre. The article further noted that this was 2nd such price hike in the last 8 months. That got me thinking as to why many organisations that I have worked with did not take price as seriously as marketing, sales or cost savings. Continue reading Price : The most unexploited profit lever