GP% (Gross Profit Margin) is used broadly for pricing decisions across many organizations, namely those which transition from a legacy in cost-based pricing towards a more value-based pricing approach. However, GP% is not an appropriate measure for price setting. Employing GP% in value pricing is just one of many examples where an overly simplistic compromise is often made, sometimes putting a business into bedlam, as the author explains.
On the most basic level, businesses need to meet their customers’ needs by delivering products and services that are considered worthy of the price paid. In each industry, there will be several competitors trying to compete for the customer dollar. The size of your business matters much less than having a sound strategy. This article is an excerpt from the author’s recent eBook “Selecting a Strategy for Market Leadership.”
The need for coaching applies across all sports and virtually all collaborative pursuits. Great coaches prepare their team mentally and physically and help business teams achieve commercial excellence. Coaches understand the game, and most coaches are experienced players. Value management and value selling are collaborative business pursuits where good coaching helps business teams win, as the author explains.
In order to design and deploy value-based strategies, including value-based pricing, firms must be equally obsessed with obtaining deep customer insights and deep competitive information, as the author explains.
The purpose of this short paper is to share best practices for EVE® (Economic Value Estimation) models with the pricing and marketing communities.
The question of how value should be split arises repeatedly in customer-value-centric organizations. It should be addressed in a thoughtful and systematic way. When building a product development or launch plan, teams debate feasible pricing ranges based on capturing value. Product teams who incorporate value into their discussions indicate that it helps them understand their positioning better and that it makes their decision-making customer-centric. In this article, the author presents several approaches to framing the value-capture questions and developing effective value-pricing strategies.
Despite the increasing industry-wide move towards and focus on value-based pricing, it is still clear that cost plus has its role as a pricing strategy in a number of instances. But even when a cost-plus pricing strategy is used, be careful about what the real advantages are, and what alternative strategies exist.
In this two-part article, the author discusses value-based pricing from both an organization-wide view and more specifically from the view of the product manager. He begins by reviewing what a value-based product strategy is, how it helps make better decisions, and helps differentiate your products from the competition. In the second part of the article, he explores the six common missteps product managers make about value and provides best practices for how to avoid these errors
One of the challenges pricers face on a daily basis is maintaining value pricing strategies in the face of sales teams dealing with customers looking to reduce costs. However, as the cases presented in this article demonstrate, sourcing and procurement teams and pricing and sales representatives don’t have to be enemies. In fact, they actually share the common goal of creating value as economically as possible.
Economists would have us believe that no price is too low. But as pricers, we know that this is not the case, as our price communicates a great deal to our customers about the value of our product or service. In this article, the author examines the importance of the price-quality effect in developing profitable pricing strategy.