Fixing Mistakes in Your Pricing Structure: 2 Examples

You analyze reams of data. You carefully evaluate potential pricing policies. You select what you think is the best one. And then your users tell you that they hate it. And not just because no one likes to spend money unnecessarily. They actually have good reasons. Had you known them at the beginning, you would have priced differently. So what do you do now?

Zoho, makers of popular online applications for CRM and office productivity applications, apologized on their blog and revamped their pricing. Essentially, they had not understood how some of their customers actually used their Creator application. The pricing policy had forced customers to trade off between buying a lot of things they didn’t need to get a few features that they did need, or going without. Pricing is about capturing value, but the initial policy failed to give free and low-cost editions the capabilities that Zoho wanted them to feature. So they tried again. Perhaps it’s a bit embarrassing to write a blog post like that, but it’s much better than pretending everything is fine, or queitly making a change and sweeping your mistakes under the rug.

Zoho is lucky in some ways. They can change prices easily because they sell Software as a Service (SaaS). They don’t have to deal with catalogues, price tags, contracts, and other overhead that goes with a price change at many other companies.

Dell is infamous for having different prices for essentially the same computer depending on which part of the website you visit. This is because during its breakneck growth, Dell organized around segments (Small Business, Home, Student, Government, etc). Segment leaders maintained control of their pricing, leading to inconsistencies. It got worse, as different promotional policies could result in the same machine in the same segment showing different prices. Customers complained on Dell’s IdeaStorm online feedback forum. Now Dell is touting consistent pricing for their Vostro laptops for small business. It’s a good start.

While these approaches draw attention to past missteps, they build a better relationship with customers than the typical press release-style price changes, where everything is spun to sound wonderful.

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