Pricing Strategy

Price to enhance profit growth with leading-edge pricing strategy consultants.

Ideally, setting your prices should be straightforward. However, prospering from strategic pricing to ensure optimal profits and sustainable competitive advantage requires a more scientific approach towards pricing policy and implementation.

Like all parts of the marketing mix, pricing is completely inefficient in a silo. It is just as important in the management of exchange between seller and buyer as product, promotion distribution, positioning, people, processes, and environment and needs to be fully integrated and coordinated within the marketing mix.

Hence, pricing MUST be a marketing-led activity that is:

• Synchronized with positioning, product management, marketing communications, and internal marketing
• Aligned with distribution and supply/demand chains
• Responsive and in-tune with your processes
• Acceptable to stakeholders
• Always appropriate from a compliance, implementation, and management perspective

Pulling a price ‘out of the hat’, applying prices you can ‘get away with’, pricing on a cost-plus basis, or pricing reactively all undermine your business’ long-term capacity to prosper at an optimal level.

Pricing expertise comes from having in-depth understanding of the dynamics of marketing and consumer behaviour, is based upon academically proven models, and is supported by commercially sound research.

No two organisations are alike. Different product categories mean different dynamics. Geography, culture, technology, laws and guidelines, ethical nuances, ecological factors, industry structures, power balances, seasons, climates, economic buoyancies, and competitors vary from industry to industry, market to market, and segment to segment. So, if you employ a pricing strategy that worked for someone else, it is like randomly using someone else’s blood and hoping that it matches your own.

Understanding pricing metrics can make profits soar. Applying appropriate product analysis models, the 8 Ps, PESTLE, and 5-Forces in concert with accurate behavioural analysis of target segments means your pricing strategies will maximise profits while ensuring you consistently outperform the competition in terms of sales.

Using research, you can discover the right price to sell at, the right price to discount at, the right price to wholesale at, offer RRP for, and reposition to in order to significantly improve profits with soaring sales.

Value-based pricing uses buyers’ perceptions of value, not the seller’s cost, as the key to pricing. The organisation uses non-price variables in the marketing mix to build up perceived value in the buyers’ minds. Price is set to match that perceived value.

However, value-based pricing can be flawed if segments are ignored or misunderstood. Generalising about price elasticity can be fatal—as can basing pricing strategy on incorrect assumptions about your industry, life cycle, competition, total product, and price perception.

Pricing and Price Management Strategy Using Proven Pricing models, Practices, and Theories.

Different objectives influence pricing strategy choices. Some of these include:

The key to a winning pricing strategy is for pricing to be integrated and coordinated with ALL the other components of the marketing mix. You must incorporate customer value, competitive marketing dynamics, and your own corporate strategy.

Without in-depth strategic pricing knowledge, pricing strategies can be so complex, they take years of work to implement. Some pricing problems exist despite the business knowing they have a problem. Many persevere not knowing their pricing strategies are eroding profits, interfering with sales, hampering reputation, and undermining competitive advantage.

Understanding buyer behaviour across all segments in a market—whether it’s B2B or B2C market—is a key factor in pricing for success.

Price and pricing strategy is interwoven tightly with all other elements of the marketing mix. Change the product and you need to review the price. Change the distribution and you’ll also need to modify the price. Change the advertising? Same thing. In fact, it also applies when you change processes, the people supporting the product, and your positioning.

Advanced pricing strategy is about advanced real-time marketing management for each individual segment. Price can be the most scientifically manageable and most potentially powerful profit-generating tool in the marketing mix.

IMPORTANT: The ‘rules’ vary according to budgets, goals, resources, specialization (i.e., product type), product category, competitive positioning, category life-cycle, segments, target audience, and other similar factors. In other words, you really need an expert if you want to do it properly.

• FMCG? Use advanced data mining and analysis techniques to identify the optimal discount price point for ‘case deal’ promotion at retail.
• Juggling multiple segments? Use scientific product classification analysis to determine the optimal pricing strategy according to buyer behavioural constants observed in specific product category types.
• Need market share growth in a competitive industry? Use life cycle analysis to select the best pricing policy for satisfying anticipated customer trends and winning market approval and market share growth.
• Need more profits? Use sophisticated product analysis, market analysis, competitor analysis, and product portfolio management methods to forecast future sales with accuracy, generating better production and inventory control.

Often referred to as pricing strategies, these are some of the techniques you can use to improve your business’ performance.

Keep in mind, however, that this is just a brief overview. Using these tactics without the proper strategy might be unsuitable for your business.