On 29th June 2017 I headed to Bonn, in Germany, for the inaugural PriceCon. The 1-day event was targeted at startups, business founders, and individuals interested in the field of pricing.
Hosted at Deutsche Telekom's Head Office, the event was kicked off by keynote speaker Professor Dr Berndt Weberfrom the Centre of Economics at the University of Bonn.
He introduced the science behind decision making, and showed us how there are three systems at play:
1. Decisions based on a reward
2. Decisions based on a loss
3. Cognitive Control (or rather the irrational human!).
The case study I particularly liked from Dr Weber, was the test they used involving wine! Participants heads were placed in a MIR scanner and they were fed wine through a straw.
Participants were then told the price of the wine for each measure, and their brain activity was recorded. In actual fact, they were tasting the same wine each time, and it proved that we are all influenced by anchor pricing.
Digitising the monetisation of B2C and B2B Businesses
Christian Koldoziejczak, Senior Consultant at Ernst & Young, led the first workshop of the day. He showed us the power of segmenting your pricing dependent on market or application, for example by making your products available to students (who might not otherwise be able to afford them), using student discounts.
The higher prices are accepted by non-students who can remember what it was like to be a student with no money.
In order to be successful at segmentation, we learnt the importance of having the right implementation tools, whether it be customer analytics, price setting/re-pricing tools (with solid checks in place!), as well as social media control to ensure segmentation strategies are not misunderstood.
The Dollar Beard Club
Alex Brown, co-founder of Dollar Beard Club, then gave us an exciting insight into how they got their successful business off the ground by using similar video marketing techniques that worked so well for the Dollar Shave Club. You can check out their viral marketing campaign here:
Interestingly, their business now sells very little for a dollar, and over time they have moved towards becoming a more premium brand, so much so that soon the "Dollar" will be dropped from the name. Price perception in marketing there, plain and simple.
Next up, it was Jan Dominik Gunkel from Wachter Digitial Partners, a German consultancy. He discussed how to influence customers using behavioural pricing. His concise slides on eCommerce Pricing Models to be considered included:
- Promotional Pricing - e.g. Christmas Special.
- Channel Specific Pricing - e.g. pricing differently on a price comparison site.
- Product Specific Pricing - e.g. discounting on the product the customer is searching for. All other products regularly priced.
- Adaptive Pricing - e.g. pricing of searched products decreased. All other products increased in price to compensate for the lower margins on the first product.
- User Specific Pricing - e.g. user vouchers based on spending habits.
Unleashing the Power of Value Based Pricing
Then came my turn to introduce the importance of value based pricing. The key conclusions from the session were:
- Remember you're not selling widgets or features.
- Beauty is in the eye of the beholder, and therefore different customer types will see the value of your product differently.
- Document a list of value drivers that you think are the most important for your product or service.
- Go out there and talk to your customers. Get the truth from them as to what they perceive your value drivers to be. You may be shocked that they are different from what you documented. It can be a formal piece of research or less formal over a bite to eat or a casual drink.
- Try and work with select customers to rank the importance of these value drivers.
- Make sure your price reflects these value drivers and your marketing messages, and sales teams can easily articulate your value drivers.
The day was wrapped up with a panel discussion including three startups: Muhire Louis-Antoine from Mergims, Ganesh Muren from Saora Industries, and Lucian Cramba from Fast Order App.
What was interesting from Muhire and Louis was that the power of pricing for them only became apparent when they were running low of financing, and it was a shift in the pricing model that enabled them to turn their fortunes around.
A lesson for us all there to make sure we have fully considered the pricing model early on in our businesses lifecycle.
A big thank you to Cedric Teichmann and team for organising and hosting a fantastic event.