How is customer information used as a part of the pricing strategy?

Well, you must first understand that pricing strategy has two kinds of goals.

The first is profit maximization — whereby the aim is to make as much money as possible in every transaction. The other goal is revenue maximization — whereby the aim is to maintain customers by giving them a favorable price and providing them with incentives such as gift cards or bonus points.

Each pricing strategy has many factors and including customer research, market analysis, future projections on how the company will progress and what can be improved for the future.

Once these things are figured out, then also taken into consideration are all costs needed such as retail store leases or website hosting fees which might be passed onto customers through the product’s prices in order to cover them.

Other companies even charge for emotional costs, which apparently cover the difficulty of getting to their earliest customers (I know, right?!) — this is what we sometimes call market penetration costs.

Customers pay for all these (and more).

Their information is vital not only because it helps with totaling these costs to a single amount or range, but in getting the same customers to happily pay for it (using customer information to better tailor a personalized premium package for the customer, for instance).

I can go on and on, but I’m hoping you get the gist.

Photo by Minerva Studio (license purchased by the author)

This post was originally published here.