If you’re a small business, its probably you as the owner. If you’re a medium to large sized business, then maybe its your senior commercial or finance person, but ultimately you still have overall control.
The Sales team always want the cheapest prices, the Finance team want the highest margins and the Marketing team want the best offers.
Assuming you control the pricing, how are you making pricing decisions to take all of these needs into account? Are you using the same old “cost plus” or “competitor benchmarking” strategies that everyone else has been using in the entire history of business? If so, then you are not optimising your pricing and you are are not giving yourself a competitive advantage.
Learning about pricing is one of the most valuable things you can do for your business. (Or if its not you, nominate someone in your team to do it.) There are plenty of good books out there with simple, clear advice – I can recommend a few if you are interested. Having a better, smarter pricing strategy is one of the key enablers for profit growth and building a sustainable business over the long term.
I’m not talking about a deep analysis of costs or analysing loads of customer data. You do need to know some basics (i.e. variable versus fixed costs, gross profit margins, etc) but its much more important to learn about:
- how customers make buying decisions
- what criteria they use to evaluate your products compared to the “next best” option
- how to segment your market according to a customer’s “willingness to pay”
- the psychology of pricing and how to frame your prices so that you can increase the perceived value
- how to clearly communicate and articulate the value of what you do.
This is what I see as an “external” view of pricing which looks at your customers, your market, your competitors and your products, rather than in “internal” view which only looks at costs and gross margins.
Mark Peacock: The Pricing Coach
Mark’s mission is to help small businesses unlock value through better pricing strategies and price coaching. He is passionate about pricing and how it can be used to achieve improved results quickly and effectively.
Discover Pricing for Profitable Growth – An 8 week programme designed to enable you to rapidly clarify your options, make decisions and take action to increase your prices and profitability.