Pricing Your Product Right in Your New Market

One of the key pathways for top-line growth is launching a current product into a new market. Pivots to new geographies, new industries or from one business-size segment to another are tried and true strategies for growth. While this might sound simple, we often find that product and marketing leaders fail to reassess their pricing strategies before entering new markets, resulting in product pricing that does not accurately reflect buyer needs and the environment in the new market.

I addressed this topic in detail during a session for product leaders at SiriusDecisions’ recent Summit 2015 in Nashville. It’s a significant issue, because the damage from faulty pricing when entering a new market can be irreversible, as salespeople struggle to communicate the offering’s value and buyers dismiss the offering due to lack of value/price alignment.

Here are the three key issues to address when developing prices for a new market:

• What value metric should I use? A value metric is essentially how you charge. If you are selling information services, for example, you might charge by user, by content or by company. The metric you select should be directly related to how the buyer gains value from the offering. In one market, the buyer might seek to provide additional users access to information, whereas in another market, value might come from users gaining access to more information. To figure out the best value metric for the new market, test candidate metrics to see which one best represents how a buyer gains increased value.

• Do we need tiered pricing? Price tiers are different from tiered offerings. Price tiers essentially provide lower pricing for buyers that consume more of the offering. If the new market has buyers with a wide range of appetites for the offering, then you probably need tiered pricing. Be careful, however, that you are not just selling more of the offering for less overall revenue.

• What is the optimal price level? Clients often ask how much they need to lower their price when moving from the mid-market to enterprise, as they often envision large purchasing departments intent on driving down their prices. In order to assess need for a lower or higher price level, ask if the offering is more important in this new market or if there are triggers (such as new regulations) driving urgency, both of which can increase the market price level for the offering. Most importantly, assess the value proposition of the offering in the new market vs. the current market. It could be stronger and thus support a higher price point.

Once you have set your pricing in the new market, be sure to provide sales with enablement and selling tools (such as value actualization tools) so they can support the price of the offering in the new market.