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Connecting customer empathy with pricing strategy?

There’s an interesting article on HBR that I was sent this morning. What is the link between pricing and your product or service’s story?

The article starts out with a primer of the four basic pricing strategies:

  • 1) bottom up – calculating the cost to produce a product or service and adding a margin
  • 2) sideways in – analyze and adopt the prices of competitors
  • 3) top down – engineer the product or service price to meet a targeted economic segment
  • 4) dynamic – use an algorithm to calculate real-time supply and demand

And then there is a fifth strategy:

  • 5) story analysis – analysis of the product or service ability to meet a profound human need. It uses this to tell a story that gives life a richer meaning.

Rob Walker from the New York Times Magazine concluded that story analysis pricing strategy is not aout the objects themselves, but the context, the provenance of the objects, that generates value. The value is in the story or the meaning that the objects represent.

Walker experimented and the findings are so incredible they created a website to publish the results: http://significantobjects.com/about/ His experiment reminds us in a clear and extremely tangible way how the concept of value works in the human brain.

How then does this story relate to Clayton Christensen‘s theory of disruptive innovation and the ‘job’ people are hiring a product or service to do? http://www.youtube.com/watch?v=Gh2-oTLWJ0c

Disruptive innovation is an innovation that helps create a new market and value network, and eventually goes on to disrupt an existing market. The term is used to describe innovations that improve a product or service in ways that the market does not expect.

Can an existing service connected with a compelling story also be considered a disruptive innovation?

The author of the HBR article, Ty Montague, concludes with: In a world of almost overwhelming abundance, an authentic, meaning-rich story becomes the most important ingredient to drive a company’s margins.

By connecting with customer empathy, both the compelling story and ‘job’ the customer is hiring for can be articulated, making sales a lot easier!

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