Wednesday 12 February 2014

Is relationship pricing the answer to better pricing?

The issue of dual pricing for organisations is a tricky one i.e. providing introductory offers to new customers which are not available to existing ones. It is a pretty common practice in a wide range of sectors from consulting services through to mobile phones, health clubs etc and can be a real source of discontent for existing customers who see their loyalty go unrewarded.

However the whole concept generally flies in the face of fairly common knowledge within the marketing industry that it is c 5-6 times more cost-effective to retain customers than to lose and recruit new ones. This would then point to the power of relationship pricing where customers get more discounts if they have more products with the same company thereby making them more "sticky" and more likely to stay. There is an assumption by the customer that the discounts offered are giving them a good deal competitively, not always the case, and a trade-off in reducing choice but making decision making easier.

In reality, relationship pricing is only really better if there is a genuine commitment from the company to treat both new and existing customers fairly. Sometimes the lack of fairness is only identified when customers choose to leave and discover that there is indeed a better deal which  would benefit them. Finding examples of best practice is difficult, but a key factor has to be in being proactive in providing existing customers with genuinely better deals, which might actually include simplifying what's on offer rather than complicating it more!.


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