When was the last time your organization created new pricing for a product or service? If it’s been a while, it might be time to revisit your prices.
Choosing the right price for your association’s services can deliver powerful results. A 1% price improvement can lead to a 10% increase in profit.
Read our blog to learn valuable tips and tricks to get the pricing right for your organization.
What is pricing and why is it important for your association?
Pricing is an important factor for your association because it captures the value of your services. It’s important to remember that costs don’t drive your prices. The willingness to pay drives your pricing. The willingness to pay is all determined by how your members and non-members value your services.
As you build your pricing strategy, it’s important to consider who leads the conversation about pricing at your organization. Is it your CEO? Your Education Director? Or a Pricing Committee? Whoever owns your product or product launch should also be involved in the pricing conversation and strategy.
6 potential association pricing strategies
To ensure you find the best approach to pricing your organization’s services and products, here are six strategies you should consider:
1. Value-based pricing
A way to adjust the price of goods or services based on their perceived value, according to customers.
2. Competition-based pricing
A practice where an organization sets prices at or below the prices of its competitors.
3. Cost-plus pricing
A pricing strategy in which deciding the price of a product is determined by adding a fixed percentage to the product’s total cost.
4. Freemium
This strategy offers basic services for free and advanced services for a premium price.
5. Project-based pricing
A pricing strategy where you charge a fixed rate for completing a specific service or project.
6. Geographic pricing
A method to price services based on different geographic locations, including factors like local demand, distribution costs, and competition.
How your association can leverage the Van Westendorp Price Sensitivity Meter
When looking at some of the association pricing strategies, especially the Value-based pricing strategy, you may think, “How do I know what people are willing to pay?” Well, the Van Westendorp Price Sensitivity Meter can help answer that question.
In 1976, Dutch economist, Peter van Westendorp introduced the Price Sensitivity Meter to help measure someone’s willingness to pay for a product. The Price Sensitivity Meter includes four price-related questions and offers simple, data-driven insights to any organization.
The Price Sensitivity Meter is a helpful tool for your association to use when you’re getting ready to launch a new product or service. You can also use it as you’re preparing to reposition an existing product, but it is most often used when launching a new product or service. The Price Sensitivity Meter will offer helpful insights as you look to change the offering or capabilities of your products.
As you’re building your Price Sensitivity Meter, you’ll use these four simple Van Westendorp questions, so you get a sense of how much your members value your products or services:
- At what price would you consider the product too expensive?
- At what price would you consider the product to be priced so low that you would feel the quality couldn’t be very good?
- At what price is the product starting to get expensive, but you still might consider it?
- At what price would you consider the product to be a bargain, or a great buy for the money?
With all this information in mind, you’ll be ready to construct your own Price Sensitivity Meter! First, you’ll also need to determine your product offering, defining what it does, and highlighting its perceived value. For example, if your product is a certification, consider the long-term value it offers your members. Next, you’ll need to choose your survey tool, build your survey, and define your audience. You’ll need to ensure you tailor your demographic information to the survey and clearly define your payment terms. For example, if you’re assessing certification pricing, you should include certification demographic questions.
After you’ve executed your survey, you’ll be ready to evaluate your data. Start by reviewing your survey responses and verifying that all are complete. Next you can create your graphs to visualize your results. Finally, you can analyze your results and make a final pricing recommendation.
Pricing strategy is important for your organization to take seriously. Explore the strategies and resources outlined in the blog to compile results, analyze, and make recommendations for your association.
