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Estd 4.22.2023
Based on the principles outlined in our pricing strategy book, Price to Scale, you can indeed create a special pricing tier for users in lower-income regions—but with a strategic approach that avoids simply undercutting your revenue.
Here are the key points to consider:
• Segment Your Customer Base:
The book emphasizes the importance of segmenting your customers and tailoring product offerings accordingly. Instead of slapping on a simple discount, you would design a distinct tier that meets the unique needs and price sensitivity of those markets while preserving the value proposition of your higher-priced plans.
• Offer Alternative Value Propositions:
As noted on page 245, it’s effective to offer alternatives that aren’t just cheaper but may include conditions (like longer-term commitments or specific add-ons) that maintain revenue integrity. This approach helps balance accessibility with profitability.
• Avoid Direct Cannibalization:
The idea is to structure your tiers so that customers accessing the lower-priced option aren’t simply shifting away from core revenue streams. Instead, you create a lineup where each segment—whether premium or cost-sensitive—receives a product tailored to its willingness to pay, reducing the risk of price comparison that might pressure your premium offerings.
• Practical Application:
By differentiating the product’s features or adding specific terms to the lower-priced option, you can enhance accessibility without significantly reducing overall revenue. Essentially, the lower-income segment becomes a separate cohort with its own pricing logic, which, if designed well, can open up new markets without eroding premium revenue.
In summary, creating a special pricing tier for lower-income regions can be a smart strategy if executed with clear segmentation and differentiated value. This way, the product remains accessible for cost-sensitive customers while protecting and even potentially boosting revenue from other segments.