Want More Profit?
Manage Your Pricing!
For the average firm, a 1% increase in price drives a 10% increase in profit! There is no other business activity that has the same profit impact as increases in price. And yet, for many companies, while a 1% increase in price is usually a small amount of money, getting that 1% is really hard.
An Exercise: Picture one of your products, and its current price. Multiply that price by 1% (for example, if the product’s price is $10.00, 1% is $0.10.) Notice how small that 1% is relative to the product’s price?
Why is it so hard to manage pricing well? There are eight reasons (click here to learn more about these profit sapping challenges):
- Lack of managerial focus – managers often see pricing only as the “set price” exercise rather than as an integrating activity for the entire marketing effort.
- Power procurement – many companies have developed sophisticated purchasing practices that systematically drive down their suppliers’ bargaining power.
- Offering design challenges – many companies do not design offerings for specific customer segments, forcing them to price compete on the offerings they do have.
- Uncontrolled discounting – lack of discipline in managing discounts leads to increased price negotiation and price sensitive customers.
- Poor price determination methods – setting price based on costs or competitive prices systematically undermines prices and profit potential.
- Diffused pricing management – in many companies there are many functional inputs to the pricing decision, often with conflicting – and confusing – results.
- Short term competitive perspective – overlooking the consequences of competitive moves (the average price war lasts 5.2 years!) often destroys profitability.
- Reactive price decisions – failure to assess the profit implications of proposed pricing moves resulting in sub-optimizing profitability.
The good news is that each of these “profit destroyers” is manageable! Using its Well Business Pricing Management® system, World Class Pricing can help you find your way through the market maze and create profitable pricing management skills and processes.
If your goal is to drive your business’s profitability, then contact World Class Pricing and we’ll show you how to unlock the power of Pricing Management.
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"The Sales Team And Pricing Success"
Implementing Pricing Strategy
The sales team is critical to successful pricing strategy implementation; sales effort can make your pricing strategy an outstanding success or a miserable failure. So how can you get your sales team to pull your pricing strategy into place? The answer, suprisingly, does not always lie with the sales team - it lies in thorough preparation by the marketing team. George Cressman shows how to enlist the sales team in successful pricing strategy implementation in a new Professional Pricing Society online course "The Sales Team and Pricing Success." This online course is available to PPS members at www.pricingsociety.com under the "Online Courses" tab.
Managers are increasingly concerned with pricing strategy implementation challenges. George Cressman provides guidance on how to manage pricing strategy implementation in two recent Journal of Professional Pricing articles:
"Why Pricing Strategies Fail," Journal of Professional Pricing, Second Quarter 2009, page 18.
"Selling Value Based Pricing Strategies: Making Pricing Strategy Work," Journal of Professional Pricing, First Quarter 2010, page 16.
For additional details on the online sales team course or pricing strategy development and implementation, contact George Cressman at George.Cressman@WorldClassPricing.net.
And More New!
A new white paper is now available: "Pricing Professional Services." Although the paper is written around professional services, providers of all types of services will find the pricing methodology outlined in this paper helpful. Register in the Login tab above and access this paper under the White Papers tab.