Marketers should view pricing decisions as an opportunity to create value.
Intelligently managing price structures and levels is the most important topic to secure business success. Get it right and you will thrive. Get it wrong and risk permanent damage to your business. Think of an investment in pricing as an investment in the future. This is part 1 of our new Pricing Basics series. Show Excellence in pricing goes far beyond the price of an individual product. It involves strategy, goals, positioning, but also governance, tools (software) and finally all of a company’s processes and culture that ultimately result in the price tag. It requires experts with an in-depth understanding of customer segments, the products’ value-to-customer, and experience in handling the relevant business data to come to the right conclusions. Pricing for profit: A simple formula Optimal pricing plays a pivotal role in achieving profitable growth. A 5% improvement in pricing without volume loss and average margins can boost profits easily by 30% to 50%. You may already have a cost-cutting strategy in place in order to boost profits. But no matter how heavily you invest in increasing volumes and cutting costs, this can only take you so far, and intensive efforts have often already exhausted all potential. So where should you go next? Let’s start by breaking down profit into a simple formula with three drivers: Even though price is a multiplicative factor in this formula, our experience is that it often receives the least attention. However, pricing is often the only untapped lever left to achieve higher profits. How can you shift from a predominantly internal and cost-cutting focus to an outside-in focus? There is always a profit-optimal price point and the way to find it is through a systematic and quantified approach. It’s all about closing the gap between what a customer is willing to pay and what you actually get. Pricing is a game of intelligence. Start playing it! What are the top pricing challenges? Price can be the biggest profit lever, but also the most dangerous profit destroyer. Where does pricing go wrong in daily practice and what can you do turn this around? Here are our five top solutions to overcome the most common pricing pitfalls:
Why is pricing important? In markets with increasing volume and price pressure, the right pricing approach is essential to remain competitive. It brings you the value you deserve for your products and services offered and secures the profits you need to invest in change and growth. Let’s be clear, it is still important to run cost-cutting initiatives on a regular basis and to increase the efficiency of your sales organization. But be consistent and honest with yourself: Invest at least the same amount of energy, time, and money in improving the biggest profit driver "PRICE”.
Enjoyed reading our article? Good news: This popular series is available as A Practical Guide to Pricing! Download our free eBook now and learn how to achieve a sustainable, competitive advantage through pricing! Why is market pricing important to decision making?Why is pricing important? In markets with increasing volume and price pressure, the right pricing approach is essential to remain competitive. It brings you the value you deserve for your products and services offered and secures the profits you need to invest in change and growth.
Why is understanding pricing important to marketing values?Pricing is important since it defines the value that your product are worth for you to make and for your customers to use. It is the tangible price point to let customers know whether it is worth their time and investment.
How can a marketer provide value pricing?With value-based pricing, the marketer's goal is to put a dollar amount on its differentiated features. The method's focus is on features that add value to the customer and that can be converted into dollars and cents.
What should you consider when making a pricing decision?Five factors to consider when pricing products or services. Costs. First and foremost you need to be financially informed. ... . Customers. Know what your customers want from your products and services. ... . Positioning. Once you understand your customer, you need to look at your positioning. ... . Competitors. ... . Profit.. |