Control: The Cornerstone of Effective Pricing
Author: Marcelo Krybus, CPP Proper control and analysis are indispensable [...]
Author: Marcelo Krybus, CPP Proper control and analysis are indispensable [...]
In the rapidly evolving business landscape, effective price management is a critical factor in determining a company’s success. Effective price management is a continuous process that requires a nuanced understanding of market trends, customer expectations, and ethical pricing considerations. It’s about finding that sweet spot where profitability meets fairness, contributing to both immediate financial success and long-term brand loyalty, as the author explains.
There is no denying that pricing is the most complex discipline in an organization. However, your customers do not care about your complexity. They do not want to be on the receiving end of it. They have options and will clearly move on to another vendor. So how do you manage the pricing complexity that is increasing daily in these changing market conditions?
Customers want the best value, not necessarily the best price. Our job is to justify the price based on the value we deliver. Often customers do not know or purposely ignore this. This includes the product, services, support, and terms and conditions we offer. Getting a lower price from a competitor is not the same as getting the “same value” at a lower price. Knowing and communicating your unique value proposition is key in implementing price increases, as the author explains.
Companies make the most of their investments in pricing teams and technology when they focus on the new job of pricing: maximizing customer value. That means creating the right solution spaces for salespeople rather than overemphasizing price points, and it means turning pricing professionals into revenue managers who advise sales teams based on models calibrated around product, promotion, contract terms, price, and service elements, as the authors explain.
Inflation is headed up over 8% per year and could go over 10% in the United States. Interest rates are rising in response, and the economy could tumble into a recession (two consecutive quarters of contraction). Boards need to help their companies develop the resilience to survive these changes and prepare them to adapt to a changing environment. One step towards doing this is to ask some basic questions about pricing, as the author explains.
In pricing, there are two types of complexity. Good complexity can lead to competitive advantage if you can make it simple for customers to absorb. Bad complexity can frustrate potential customers and cause them to seek another solution. In this article, the author provides best practices for making your differentiators and value drivers easy for customers to understand.
In 2021 there were more than 2,000 mergers with a deal value of more than $100 million in the US (from Statista). The received wisdom, supported by a fair amount of evidence, is that mergers often destroy value. There are many reasons for this, but one of them is pricing. Pricing is where buyers give a verdict on your offers and whether or not they are valuable. Alignment on pricing is critical to a successful merger, as the author explains.
With rising prices, raw material costs, and energy expenses, it’s safe to say goods are more expensive than they have been in years. And there seems to be no relief in sight. In this article, the authors explore best practices for pricers in both B2B and B2C industries to grow profits despite inflation.
This article is an excerpt and sneak preview from the new book by Dr. Hermann Simon and Professor Martin Fassnacht entitled “Price Management – Strategy, Analysis, Decision, Implementation” (New York: Springer Nature 2019, 558 pages). Detailed author biographies are included at the end of the piece.