Segmenting customers and optimising pricing

Segmenting customers

  • Segment customers by their willingness to pay for various products. (only product, product + installation, product + installation + service)
  • sell different products to optimise revenue across the board (Freemium, bronze, silver, gold)

Pricing

  • Some people are willing to pay a lot more for your product than you are currently charging.
  • Some people won’t buy right now because the price is too high.
  • Find the equilibrium price that will capture the most customers.
  • When you ask your users/customers for a coupon code, you’re basically giving them an IQ test asking, 'Are you dumb enough to pay full price or would you rather pay less?' This sends people out of the checkout flow where they may get distracted and abandon the process altogether.

Optimising revenue is about structuring transactions with additional options so that people don't believe they are paying more - they focus instead on the convenience, value and experience you are offering them.

Make it easy as possible for the user to buy/try your product - sign-up for a 14 day free trial without entering your card details, just an email address. You can offer to extend the trial in exchange for more details/user information if needed.

Customers self-select from the options presented: uber vs uberX, Spotify single-device vs. multi-device access.

Bundle an incentive with a recurring billing product.

  • consumers are buying down the price of the product (the discount being the incentive) I.e iPhone is only £100 when purchased with a £30 a month contract, rather than £599.
  • In order for incentives to drive more conversions, they have to be relevant to your audience. I.e free shipping is a good incentive for consumer products.

Example: New York Times

  • readers did not want to pay for content.
  • an offer was placed in the subscription flow: 'Visit Whole Foods and you can read NYT for free online.'
  • Whole Foods were willing to pay for referrals - more so than the readers were willing to pay for the news.
  • New York Times played middle-man and generated revenue without charging customers for content.
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