Price is the primary feature of every transaction—so why is it often treated as an afterthought? Most companies use pricing approaches developed before the internet, failing to harness modern analytics. A company’s customer relationships vary widely; shouldn’t each customer’s loyalty to their product or service be reflected in their price?

In this age of increasing price transparency, uniform pricing is no longer sufficient. The best way forward is to create personalized pricing for loyal customers and resist the constant discounting pressure of internet price aggregation. In Price, Cactus Raazi invites readers to shake loose of their pricing preconceptions. Whether a corporate executive or a sole proprietor, they’ll see how personalized pricing can improve customer loyalty and turn episodic transactions into recurring revenue. I recently caught up with Cactus to learn more about his ideas in the book.

Published with permission from the author.

What happened that made you decide to write the book? What was the exact moment when you realized these ideas needed to get out there?

A number of different events came together at the same time, all of which inspired me to write Price. The widespread availability of advanced data analytics allows businesses of all sizes to benefit from their proprietary data. Pressure from internet retailers and comparison sites is stealing pricing power. The widespread use of indiscriminate discounting by many businesses is self-defeating. And we’re in the early stages of increasing automation when buying on the internet; browser extensions already seek out lower prices when buying online.

A couple of years ago while completing my MS in Analytics, I realized that I had to write a book, useful for businesses of all sizes, to highlight the threats to pricing control and to propose a smarter way forward.

The shift to e-commerce spurred by the pandemic has emphasized the importance of the ideas in Price. By definition, e-commerce captures a lot of useful customer data. How should businesses use this data? Are there smarter ideas than simply e-mailing “Sale” notices to every customer on your list? How can a business use customer data to provide a better experience to better customers while generating loyalty? These questions were important before the pandemic and they’ll be even more important after it’s over.

What’s your favorite specific, actionable idea in the book?

Every business, regardless of size, needs to think deeply about the way their approach to pricing impacts customer loyalty. Giving all customers the same price is a terrible idea. Giving your preferred customers a differentiated, individualized price, and therefore an individualized experience, is the way of the future. Previously, businesses have been trying to do this through coupons and vouchers.

But modern analytics allow businesses of all sizes to establish individualized prices at time of transaction rather than relying on generalized marketing programs, most of which have relatively small impact on loyalty. The research has shown a strong connection between a customer’s perception of an individualized experience, and their loyalty. Businesses need to be thoughtful about the ideas in Price, and then use the framework in the book to implement tactics specific to their size and industry.

Rather than write a how-to book, I wanted to push the conversation about pricing forward, particularly the ideas around data analytics, customer differentiation, and loyalty.

Published with permission from the author.

What’s a story of how you’ve applied this lesson in your own life and business? What has this lesson done for you?

My business partners and I built data analytics software to price thousands of items for hundreds of customers all day long. We happen to operate in the bond market, but the principles of our approach apply to many businesses. I use a number of specific examples in the book from businesses large and small.

While it’s not easy to generate loyalty in financial markets, it’s true that customers behave in different ways. Some are more aggressive, eager to catch a mispricing. Others are more focused on the long-term relationship and transact in a balanced, fair way. Inevitably, the fairer customers receive better pricing, on average, than those customers with unsavory reputations.

Differentiated pricing in our business has improved our ROE and allowed us to reward customers whose behavior is fair. This same idea applies to many businesses, both large and small. Provide better pricing to your better customers, with the strategic goal of maximizing their loyalty while reducing the impact of internet price transparency.