As you make your journey to value pricing, one of the very best places to start is menu pricing.
We know that different customers value different things, they all want to pay different prices - so let them. Give them three choices - Bronze, Silver and Gold.
Menu Pricing works. That’s why you see successful businesses like Apple, Starbucks and Intuit using it.
I have so many stories of people increasing their prices by 20% or more. Some people say that menu pricing doesn’t work - those people clearly aren’t doing it right.
I’m going to share a 7-step framework that will help you to build really effective packages.
You can watch the video here.
#1 - Number
You need to decide how many bundles you are going to offer.
I recommend three. This is because of the psychology of the magic of three. It’s proven to be the best number with some exceptions. Unless you can prove another number works better, start with three.
#2 - Customer segmentation
This step is the most important and it’s the reason why some people don’t think menu pricing works for them.
You need to create different customer segments. Identify what types of clients buy a particular service from you and what the characteristics of those people are.
For example, if you are selling tax return preparation services, you might realise there are some clients for whom price is the most important thing. All they want is the bare minimum doing, they just want the tax return filing. They don't want the bells and whistles, they just want the tax return doing for the best possible price.
The other end of the spectrum, you'll have some clients that come to you for your tax return, yes because it has to be done, it's compliance work but actually for them, what's most important is that they want you to help them pay the legal minimum amount of tax. That would be a different characteristic of customer segmentation.
So, you need to come up with as many customer segments as packages.
#3 - Description
Next, you need to write a description for each segment. Create a small paragraph to sum up who they are for and what’s important to them. Describe them.
You can use this language on your website or in your face-to-face meeting.
This will help to cement in your mind what your customer segments are.
#4 - Name
Decide what to call your packages. Bronze, Silver and Gold isn’t really effective because it doesn’t say anything about the package - and no one wants to win Bronze at the Olympics.
Words are really important. Come up with a name for each package that expresses the value.
#5 - Build
This is the fun stage. This is where you decide what goes in each package.
When you allocate your services make sure you are thinking about your customer segments and what those people would be interested in.
#6 - Price
You need to figure out how to price the packages. You mustn’t use cost-plus pricing - value pricing is so much more effective.
Think about the value of the packages you have created and think about the people in your customer segment and what they value. Charge a price based on those.
Make sure each price reflects the value of the package, but also gives you a profit.
The gaps between the packages are important too. There’s no formula for this because it depends on what you are selling and what your goals are.
Think carefully about your price points. Do you want your premium to be much more expensive that your entry level? Or you may want a small gap to encourage people to upgrade.
#7 - Package
Finally, you need to consider how you are going to present your packages.
There may be certain techniques that you use to communicate and convey the value of each package and help clients choose the one that is right for them.
If you need more help, I run a free online monthly training session with a different topic every month. You can attend and ask me questions which I will answer live. Click here to register and I will send you an invitation to the next session.
And if you would like to join a community of like-minded accounting professionals learning to price more effectively and confidently, you can join my Facebook Support Group here.
Wishing you every success on your pricing journey.
Chartered Accountant, Public Speaker and Author of Amazon #1 Best Seller “Effective Pricing for Accountants”
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