In this era of debate and discontent, there are a few things that almost everyone can agree one. For example, almost anyone who travels regularly will say that traveling these days is a drag. It’s not just the waiting and the security checks and the delays, either. The pricing is getting a lot of people down. In addition to paying for your ticket, you have to pay for your luggage unless you’re flying Southwest. If you want a pillow or a snack you have to pay for that in some cases. More legroom? More money. Some airlines are even starting to charge more for being allowed to leave the plane first. All of this “nickel and diming” is wearing out a lot of constant travelers.
We recently watched a brief presentation by Marco Bertini, Assistant Professor at the London Business School. Called “Putting a Price on Customer Loyalty, the three-minute video appeared on Harvard Business Review’s website. Bertini suggests that airline pricing methodologies offer a great example of how NOT to price your products or services. If that’s a given, how can you approach pricing so that your customers will feel loyalty rather than hatred?
Bertini offers five steps that will enable you to build customer loyalty while maintaining a price structure that’s beneficial to your company. We thought we’d dig into each one a bit more in-depth than he did in his 3-minute talk.
1. Focus on Relationships: Whether or not you use social media for your business, the philosophy surrounding social media has certainly begun to infiltrate many businesses. In other words, people no longer want to be treated like a transaction. Even in the B2B world, relationships need to be the focus more now than ever before. When you alter your pricing one way or the other, make sure you keep your customers or your distribution networks front and center. How can these changes benefit them as well as your own company?
2. Be Proactive: As you begin to think more about your customers, you will find that you get a better feel for what they might want next. This customer-centric approach is not only at the core of integrated marketing communications, it’s also at the heart of the Social Business concept. As customers help influence your plans for new products and/or services, you can reciprocate with pricing structures that, again, will benefit them as well as your company. You will also be able to change your pricing structures in advance of what you know your customers will request. These efforts will dramatically increase customer loyalty.
3. Be Flexible: Bertini is pretty clear on this point. “Rigid pricing does not work.” A powerful way to build customer loyalty is to reward customer loyalty. Can you offer discounted pricing or “value-adds” to long-time customers? It’s important not to short yourself, but few things drive loyalty more than making a customer feel special and appreciated.
4. Be Transparent: Bertini notes that many companies that struggle with customer loyalty also are “opaque” when it comes to pricing issues. For example, it’s not really clear to us, as customers, why airlines are suddenly charging a dollar per peanut when we used to get those for free. Of course, we can all assume it’s because the airlines are struggling and fuel prices have gotten higher, but as customers, that doesn’t make us feel any better about the extra fees. As you set your pricing structures or as you make changes, be transparent with your customers. Bertini suggests that not only will this make customers feel more at ease about any changes, but it will also encourage them to be more forgiving of any mistakes.
5. Understand Market Standards of Fairness: It’s not a secret that your customers and prospects are finding it easier and easier to comparison shop. Indeed, there are sites that exist solely to help people comparison shop. It’s important to remember that you can “low-ball” pricing or go the other way and offer pricing that seems exorbitant by industry standards. If your prices are too low, the customers you get will not likely be loyal – they’re price customers, and as soon as they find a lower price they’ll leave you. Sales consultant S. Anthony Iannarino wrote about this in his excellent blog post, “You Will Die By That Same Sword.” Similarly, if your pricing is too high, people will assume you are being unfair, and that does not earn loyalty either.
Do you approach pricing from a strategic vantage point? Are your decisions weighted as much towards your customers as towards yourself? What have you experienced in trying to earn customer loyalty with your pricing structure? We’d love to hear your thoughts!
Image Credit: http://www.flickr.com/photos/brownpau/2796999408/ via Creative Commons