Spatial Analysis: The Only Tool You Need When Pricing by Location
by Steve Critchlow, Group Managing Director, on 01-Mar-2016 11:23:50
How do you define urban, rural and remote?
Here’s a predicament you may know well: you deliver services right across New Zealand and charge for the privilege. The service delivery, that’s fine. But when it comes to the pricing of said delivery, that’s where things start getting a little murky.
Customers based in the city (or, urban as you may tend to describe it as) are charged differently to those in, well, the middle of nowhere (rural or remote). But how do you define which customers sit in what area – what’s the difference, for you, between urban, rural, and remote?
And so here’s the issue. You don’t have a clear-cut definition of who sits where, therefore you don’t have a clear-cut definition of who gets charged what, and this can all result in confusion, inconsistency and, most importantly, a huge reputational risk should this problem be exposed in the market.
Your pricing strategy needs to be streamlined, faultless, and easy to understand. The solution? Enter spatial analysis.
How does spatial analysis help us look at these definitions differently?
It’s all about looking at these generalised “definitions” – urban, rural, and remote – differently; using spatial analysis to outline a new way of thinking. And it comes down to what's most relevant for you: is it how far you travel to get to your clients? Or the size of the market once you get there?
With a relevant and in-depth spatial model that reflects the density of each area (we’re talking the metres or kilometres between your customers and potential customers) you can begin to assign accurate pricing zones.
Perhaps you’ve got existing rules within your business that apply to your pricing structure, that’s fine. By pulling together various data sources all within a sound map and data product, you’ll arrive at a model that’s both consistent and confidence-building (for you and your customers). And yes, there will be surprises along the way – an area you may have defined in the past as rural actually turns out to fit within an urban pricing zone (remember, we’re judging this on density, not your generic definition of “rural”). It’s a learning process, but one that will most definitely pay off in the long run.
How will my pricing model change?
Using spatial analysis to drive a business model as important as pricing is no mean feat. But once it’s done and dusted, the outcomes are bound to please. Not only will your business have a stronger and more in-depth understanding of the opportunities within your market, the reputational risk due to charging incorrectly is greatly reduced.
You’ll be sound in the knowledge that your clients are being treated equally, consistently, and fairly. And we’re willing to bet that your customers’ trust and confidence in you will grow exponentially given the fact you can communicate pricing decisions and options accurately.
You see, in a world that increasingly relies on the power of geospatial data for information that is key to boosting your business, it’s OK to challenge the norm and redefine standard definitions. So perhaps it’s time your business did just that.