As some of you know, Fisher Vista LLC - the owner of HRmarketer.com and HRmarketer Services Group - plans to launch a similar service in the senior care marketplace in early 2008. And just like HRmarketer was the first service to "index and organize" marketing and PR resources for the human resource industry, SeniorCareMarketer.com will be the first to do this for the senior care market. It's been no small task. By the time SeniorCareMarketer is launched, over 1,000 research hours will have been spent gathering and organizing information that will be placed into a web application that contains hundreds of thousand lines of code developed over five years. And we'll spend a minimum of 4,000 hours each year to keep this data current.
Like many of our blog readers, I'm struggling with how to price a product. How do we price SeniorCareMarketer? HRmarketer.com is priced at $3,500 per year - a steal for companies who appreciate the value of this information, the costs to maintain it and the related features/tools. But for some, they wouldn't pay $5 for the product because they "don't see the value".
Shortly after we first launched HRmarketer in 2002, we had a few slow months and as a result, considered lowering the price from $2,500 to $1,999. A trusted adviser told us "if a company won't pay $2,500, they certainly won't pay $1,999 and probably wouldn't even pay $1,000". She was right, and thankfully, we listened to her. And today, after several price increases (to coincide with expanded services), price continues to be a non-issue and last on the list of reasons why someone does not buy.
Pricing a product or service can be one of the most challenging (and often unscientific) decisions a marketer will make.
The scientific aspect involves, at a minimum, analyzing your costs, forecasting demand and studying competitor pricing. Once this information is known, you can consider one of what seems like endless pricing strategies. Here are some popular ones (by the way, my favorite Pricing blog is Pricing for Profit - if your in marketing, subscribe to the feed):
- Markup pricing: Involves simply adding a standard markup to your product's cost. A common practice amongst manufacturers, wholesalers, and retailers.
- Target return pricing: Pricing is set based on a predetermined rate of return you want. Years ago, General Motors would price its cars to achieve a rate of return of 15% or 20%.
- Value Pricing: Charging a low price for a high quality item. I would put Southwest airlines in this category. Low prices, great service. A variation of this is "perceived" value pricing which bases pricing on how customers value the product, not its costs, demand, etc.
- Going-rate pricing: prices based on what competitors charge. This is common with products that do not vary much from one supplier to another (e.g., EAPs, work-life products, etc.).
The list goes on an on. And if this is not confusing enough, there is the whole psychology aspect to pricing. Some pricing experts argue that prices should never be a whole number (e.g., $20) . Instead, this school of thought says to tap into the power of human psychology and set prices at non-whole numbers (e.g., $19.99). Research says that this can result in 5-15% more orders. Sound ridiculous? Maybe so but research repeatedly shows that customers prefer $14.99 to $15.00. Look at Apple's iTunes pricing. Do you think Apple would sell more or less music if the price per song was $1 instead of $0.99?
Adding to the challenge of pricing is the fact that there is not a lot of research on pricing in the human resource marketplace. One exception is established supplier categories like payroll processing, expense reporting, certain types of employee benefits and to some extent, job boards. There is a lot of empirical data available on pricing in these areas. But what about categories like "talent management" or "performance management"? Very unscientific pricing and tremendous variations amongst vendors.
The safest pricing strategy may be what I'll call the BITB (be in the ball park) pricing method. Then, after launch, you can make adjustments based on market dynamics :-)
Anyway, I would love to hear what our blog readers have to say about pricing strategies.
Posted by Mark Willaman
Labels: hrmarketer, pricing, seniorcaremarketer