Service providers especially understand and implement dynamic pricing systems. Whether you’re coding a new app, designing a new website, or transforming an organizational structure, the service manages change and change is, by its very nature, dynamic.

Dynamic pricing is personal. It focuses not only the on the service provided but the value of the service to the client and what that client can afford. It helps service providers avoid the pitfall of commodity pricing which often turns into a race for lowest bid and devalues the vendor’s brand and service.

Whether you’re like the farrier who adjusts his pricing for a 4-hoof trim on a sliding scale that takes into account factors such as travel time, animal cooperation, and client circumstance or a freelance event planner who finds a niche within a certain stratum of business need and client expectations, the concept of dynamic pricing changes the way you manage your business.

Using Data

Effective management of change and pricing requires reliance on data. Data need not focus entirely on numbers: it should align with your company’s larger purpose. This involves defining the personas of your target market. After all, that event planner who wants to focus on organizing weddings with budgets exceeding $25,000 won’t market to potential clients in the low budget category. Such targeted marketing requires knowing that traits of that market that one generally finds specific to that market and includes certain demographics.

Use of information to define your market niche also entails excluding other markets. Yes, exceptions exist; however, a business does not usually thrive by catering to exceptions. It grows and succeeds through focusing on generalities within a certain category. The marketing effort goes from something that appeals to a segment of the population to specifics that address an individual’s concerns.

Too much data does just as much harm as too little. The trick is in knowing what data is useful and how to organize it so that you can indeed use it. Then you have to decide how you’re going to use the information that data yields. For instance, Maserati doesn’t market its high-priced sports cars to the demographic that purchases minivans. In a gross simplification, the data they use not only builds upon those who can afford their products, but those who value the social esteem of the brand and who are in a circumstance such that a sports car suits their lifestyle.

Adapt Pricing

According to Pros.com, “Most barriers to adopting new pricing solutions aren’t due to the technology but to poor management of the learning and change process.” Changing your pricing structure requires planning and communication as well as the proper data collected, analyzed, and understood. Tactics for successful management of change in your pricing structure include securing buy-in from those employees most affected by that change, likely your sales team. This understanding entails knowing the effort required to do the jobs assigned to them.

Understanding internal pricing helps to set the minimum cost of work. Every company with more than one employee pays different wages per person. An incorrect understanding of the hours the disparate employees contribute to the task results in unsustainable pricing.

Sustainable pricing adapts to changes in technology, personnel, and skill. Updates in technology often result in greater efficiencies which reduce time spent. Such updates may also require more highly skilled personnel or the obverse. The upshot? Managing change to align pricing also manages customer expectations and sustains profitability.

The Heggen Group helps companies analyze their markets and streamlines their processes to build in efficiency and adjust pricing strategies that reflect the true cost and value of their services.