What do Pricing Strategies Offer Recurring Services Businesses?
In recurring services, an excellent pricing strategy can bring growth and customer satisfaction. Without one, a business risks revenue, churn, and limits on growth. This article talks through what is at risk and then offers impactful actions that can be taken to improve pricing strategies. It also discusses a singular solution that can automate pricing, streamline processes, and drive profitability by giving customers the priced offerings they want and expect.
In this article:
- The Lack of Pricing Strategies
- Proven Elements of Good Pricing Strategies for Recurring Services
- The OOPS Reaction to Pricing Strategies
Because recurring services is an ultra-competitive industry, every clear advantage your business can get will help.
Pricing is one of the most important issues because it is often the first thing potential customers notice about you. And it’s one of the most important factors that determine whether your current customers stay.
But why do pricing strategies matter so much? And what specifically do recurring services have to gain by using the best pricing strategies for their offerings?
The Lack of Pricing Strategies
When a recurring services business doesn’t have reliable pricing strategies, it risks growth, customer trust, and long-term sustainability.
The best pricing strategies are clear, competitive, and meet the collective and specific needs of the customer base.
But getting this right can be a huge drain on resources. A recurring services company may need to:
- Continually solicit feedback
- Conduct A/B testing
- Constantly monitor market conditions and competitor offerings
- Adjust to meet changing needs and circumstances
- Incorporate new products and phase out obsolete ones
- Alter pricing/offer combinations depending on audience demographics, location, and currency
And that’s just for starters.
Most recurring services cannot spare the resources to find and keep optimal pricing strategies. Which damages them in the short and long term.
These are some of the most common problems and their impacts:
- Depleting profits: Pricing that undervalues the offering undercuts profits. Revenue potential stays untapped, which compromises growth and opportunities.
- Unhappy customers: Unclear or misleading pricing strategies damage trust. Hidden charges cause a lot of dissatisfaction. And when customers are unsatisfied, they leave.
- Losing to competitors: Without competitive pricing that differentiates a recurring service business from the competition, customers won’t see the offering’s value. The business will lose market share and limit their own customer acquisition.
- Eroding profit margins: The wrong pricing structures can miss out on incorporating taking market trends, operational costs, or competition. This can squeeze margins and raise pressure to perform on the workers to make up for the loss.
- Limited growth: Bad or no pricing models do not support innovation, scalability, and market share, making long-term sustainability difficult.
These are all problems that can have far-reaching and irreversible consequences for the health of a recurring services business.
So what steps can be taken to stop them, and bring good pricing strategies into the equation?
Proven Elements of Good Pricing Strategies for Recurring Services
To be successful, the best pricing strategies require essential elements to be in place. These elements include:
Value-based pricing: This aligns the pricing with customers’ perceived value of the offering. This requires clear communication about your product/service’s uniqueness, which problems it solves, features, and outcomes so that customers immediately see and understand the value.
Dynamic pricing: Agility in pricing is key. Market trends, demand, behavior, and competitor pricing fluctuate, so a recurring services business needs to be able to welcome constant changes in pricing that maximize sales, customer satisfaction, and profitability.
Flexibility: Flexibility allows businesses to adapt to a changing market and enables customers to respond to their changing circumstances. Expectations and needs evolve, so flexible pricing stops the churn caused by customers being forced to go to a competitor to get the price they need. Things like personalized plans and tiered packages help you cater to all your segments.
Transparency: Customers love transparency. No one likes nasty surprises on their invoice. Clear pricing plans and terms build trust and eliminate confusion. That cuts down on disputes and boosts satisfaction.
Segmentation: Leveraging data-based segmentation (based on factors like demographics, needs, and how much customers are willing to pay) is necessary for personalized pricing. The more personalized the pricing, the more likely they are to be engaged and feel appreciated because their specific goals and needs are met.
Add-on packaging: Singular and bundles of additional services, features, or perks with core offerings to create compelling value propositions for customers. Add-ons differentiate businesses and increase CLV. Pricing add-on packages that meet customer needs enhance overall customer experience and boost retention rates. Value-added pricing packages also help businesses showcase the breadth of their services and justify premium pricing levels.
The OOPS Reaction to Pricing Strategies
These proven pricing strategies sound well and good until you realize that someone’s going to have to run all these processes.
This is where a common (and costly) mistake is made: a recurring revenue business decides to bring in a pricing strategy, but then realizes they lack the means to do it.
Especially if most of your operations are still manual. You could end up in dire straits. Right back where you started. That’s the oops factor.
There’s one way to stop this from happening. Go automated.
The right automated subscription management solution will give you self-running pricing strategies which will bring all the benefits, but cost you less in time, revenue, and resources.
Automation streamlines and consolidates all the processes involved in real-time pricing strategies. It optimizes pricing based on segmentation. It tracks the market and your competitors’ offerings. It adjusts 24-7.
It keeps track of contract terms and billing and sends all this information across sales, finance, and customer service. Automated subscription management software can even spot selling opportunities at the right place and time.
It can also give your customers the option of self-service whenever and wherever they want.
And because it’s automated, it also scales as much and as fast as you want.
And as a bonus, for no additional money, you receive all the other benefits that come with an end-to-end subscription management solution, service resource allocation, automated invoicing, payments and collection, reconciliation, recognized revenue, reports and forecasts, and financial compliance.
Conclusion
Pricing strategies aren’t just picking numbers.
They’re your first chance to influence a potential customer’s opinion of your recurring services brand.
The best pricing strategies will drive growth and revenue. But you need the right tools to get and maintain these strategies.
Curious about how automation can help? Book a free Discovery Call with our team today.
Let’s chat further.
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