Cash Flow Kickstarter Strategy #5: Get paid what you are worth- Customer Segmentation and Pricing

Business Challenges:

Small businesses may want to fit every customer into an identical price and scope to simplify their operations and sales process.  

Price is often too focused on cost instead of value to the customer.

Your company faces lower satisfaction from customers that don’t feel their needs are being met.

Negative Impact to Business Cash Flow:

Treating all customers the same risks losing sales and profit opportunities. 

A lost sale example: Customers with more basic needs may feel that they will not use all the value of your one-size-fits-all solution and the price is too high. 

A lost profit example:  Other customers may feel that they want more service or value than your cookie-cutter solution and they would be willing to pay more with a  broader scope.

Actions you can take:

Create multiple tiers of products/service bundles for your customers to choose from to fit their needs.  Ensure the difference in value and price of each level is easy for your customer to understand.

Grant customers the opportunity to segment themselves into higher or lower value bundles.  For example,

  • Product Features
  • Access
  • Delivery time
  • Team member providing service
  • Product Warranty
  • Payment Terms

Price should be focused on the value to the client. 

Reverse engineer your offerings to profitably meet customer needs.  Go through these steps:

  • Understand your customer’s needs through discussions with target customers
  • Discover the value the customer puts on this solution representing the price you can charge
  • Build a solution (or multiple levels of solutions) with costs at a level that will be profitable based on the price charged.  If you can’t build the solution to be profitable based on the value to the customer, adjust or abandon that offering.

Wishing you continued success and growth this month!

Toby Kaye

Founder and CEO