How to Maximize Growth Through Effective Pricing and Packaging Strategy

In the world of marketing, there are endless companies vying for attention and market share. And your run-of-the-mill marketing tactics and strategies will only take a company so far.

Meanwhile there’s a growth marketing lever out there that’s often overlooked: pricing and packaging strategy.

At a time when consumers can choose from ten different CRMs and twenty different hiring platforms, what’s the driving force that sets yours apart? Here we explore the dynamic duo of pricing and packaging and how they can become the driving forces behind your business.

The Fundamentals of Pricing and Packaging Strategy

Packaging isn't just about the physical appearance of a product. It's about combining pricing, features, and offerings in a way that makes customers take notice and allocate budget. Pricing is aligning your product’s monetary value with your buyer’s perception of the product’s worth. This is important so take your time in understanding the power and distinction between the two: when combined, they create a dynamic duo that can steer your business toward success.

Value-Based Pricing: Imagine you're buying a new bike. If the bike’s marketing language touts enhanced performance, durability, and a sleek style that turns heads, you might be willing to pay a premium. Value-based pricing is all about determining the value a product delivers to the customer and pricing it accordingly. It's the balance between the value received and the price paid that keeps customers coming back for more.

Tiered Pricing: Ever noticed how software companies offer different subscription tiers? Some give you the basics, while others shower you with features. This is tiered pricing in action. By catering to different customer segments with various needs and budgets, businesses can capture a wider audience without diluting their brand's appeal. Andreessen Horowitz has a great deep dive into different tiered pricing strategies.

Packaging: Packaging isn't just the pretty box your product comes in—it's the whole experience. It starts the moment a potential customer lands on your website, continues onto the pricing page where they finally make a purchase decision, and ends at the signup and checkout flow. Packaging strategy involves crafting an irresistible narrative around your product, backed by a pricing structure that seals the deal.

The Intersection of Growth Marketing and Pricing/Packaging

Great growth marketers hold a deep understanding that a one-size-fits-all approach rarely works. By tailoring your pricing and packaging strategy to different target audiences, growth marketers can create offerings that resonate deeply with specific customer needs, increasing the chances of conversion.

Conversion rate optimization: Ever abandoned a purchase because the price seemed too high? Or the product didn’t quite fit your needs? Yeah, us too. Conversion rate optimization (CRO) minimizes these pain points. By crafting pricing strategies that address objections and concerns, growth marketers can increase the likelihood of conversions, leading to tangible growth for the business.

Think Airbnb: it’s a quick-and-easy booking platform, includes high-quality images, offers personalized recommendations, and shows transparent pricing. This is a company that has implemented a user-first platform to engage users and drive conversions. Their use of social proof builds trust and further encourages quick bookings. Plus, their mobile app is just as easy to peruse as their desktop site, allowing for quick and easy bookings on the go. Airbnb excels at understanding the critical importance of optimizing the customer journey in order to drive business success.

Upselling and cross-selling: You’ve just purchased an airline ticket. As you finalize your order, the website suggests adding trip insurance or upgrading to a cushier seat for added comfort. That's upselling and cross-selling in action. Clever packaging that nudges customers to explore higher tiers or complementary products, thus boosting their overall spend and your business's bottom line.

HubSpot excels in upselling. Their software suite offers a range of plans from free to enterprise-level which allows their team to cater to businesses of all sizes. Their upselling strategy starts with the free user—free account holders can use their platform but features are limited and marked with a tag encouraging users to upgrade to a paid plan, along with a blurb describing the value that will be unlocked once they do. It’s easy to scale up with HubSpot and to switch between plans. HubSpot also uses personalized email campaigns and in-app notifications to showcase the benefits of higher-tier plans, encouraging users to upgrade. Their upselling strategy not only drives revenues—it also ensures HubSpot can scale alongside your company.

Pricing and Packaging Strategy for Growth

Let’s dive one step deeper into the world of pricing and packaging, and analyze some tried-and-true models that have worked. Adapt these for your own business using the framework in ScaleFinance’s Quick Guide to Pricing and Packaging.

Freemium models: If you're not offering a freemium version of your product, you’re missing out. A free basic version is an enticing teaser, showcasing the value your premium features bring. As customers get a taste of the benefits, they're more likely to upgrade—and ultimately, that’s going to drive growth and revenue for your business.

Think of Spotify, the music and podcast platform. Spotify offers a free version that grants access to millions of tracks with the occasional ad or two popped in. This freemium offering has attracted millions of users worldwide. At a certain point, the user is going to become so engaged that they tire of ads interrupting their music streaming. That’s when Spotify offers a seamless transition into its premium subscription which not only eliminates these ads but also allows offline listening and higher sound quality. This model has allowed Spotify to amass a massive user base, making it a prime example of a company that’s really honed in their freemium model.

Anchor pricing: Ever peruse the entree list at a restaurant (lobster for $62, steak for $58) and suddenly feel more rational about ordering the pasta? The pricey options offset the cost of your noodles. This is anchor pricing at work. By offering a higher-priced option as an anchor, you make other options appear more affordable, encouraging customers to opt for premium offers.

Apple crushes the anchor pricing game by showing off a diverse product lineup. When they introduce their products, they often include one flagship like the MacBook Pro, iPhone, or Apple Watch. The elite offerings serve as anchors, setting a perception of quality. After that, they release less expensive offerings like the MacBook Air or iPhone SE. These are more affordable when compared to their anchors and customers think of these as great value propositions, even though they’re more expensive than the other tech offerings out in the market.

Limited-time offers and discounts: Black Friday adrenaline rush, anyone? Limited-time offers and discounts tap into urgency psychology. By creating a sense of urgency, you not only drive immediate sales but also create buzz around your brand, attracting new customers and stimulating growth.

We can’t mention Black Friday without thinking of Amazon. Amazon uses a discounted pricing strategy that has completely dominated the ecommerce market. Yes, the Black Friday deals are great, but just being an Amazon Prime member rocks consumers’ worlds as well. With Prime, shoppers get fast and free shipping plus media plus exclusive deals. Amazon bundles all these attractions together, so the allure of upgrading to Prime is pretty irresistible. Every-so-often Amazon shoppers quickly turn into Prime members, making Amazon’s discount pricing approach shine as a pricing and packaging win.

Bundling: Picture a meal deal at your favorite fast-food joint. You get a burger, fries, and a drink at a lower combined price than if you bought them individually. That's the power of bundling. By combining complementary products or services, you create a more attractive package that encourages customers to choose the comprehensive offering.

We’d be remiss to discuss pricing and packaging strategies without bringing up a streaming service that does a great job of bundled pricing—Disney+. They’ve combined their streaming platform with Hulu and ESPN+ to create a single, attractively priced package. This strategy not only provides a variety of content options, but it also creates significant cost savings for the subscriber (compared to if the subscriber were to sign up for all three services separately). This helps Disney+ amp up the number of subscribers who get all three services, while the subscriber sees it as a savings.  

Packaging for Success

Remember, your pricing and packaging strategy isn't just numbers on a spreadsheet or boxes on a shelf. They’re the bridge between your business and your buyers—they’re a path that leads to growth and the foundation upon which success is built.

By mastering the art of effective pricing and packaging, you hold the key to unlocking the full potential of your business's growth trajectory. Embrace the packaging power and watch your business soar.

Could your packaging and pricing strategy use a refresh? Talk to one of the experts at Right Side Up to learn how you can drive growth for your business. Drop us a line at growth@rightsideup.co.