Price early and often for more profit. Pricing expert Mark Stiving writes for Profitero.
You surely know that when you launch a new product or service you need to price it. And that pricing exercise requires plenty of expertise to do well. However, if that is the only time you focus on price you are surely losing money. Instead, you should price earlier and more often.
Price early – If the first time you price your product is at launch, you are way too late. Ideally you conducted pricing exercises at the product definition stage.
Value-based pricing is about understanding how your customers choose between your product and your competitors. How do your customers trade off price differences for features or quality? This information is critical in defining the best products.
When you understand that value comes from differentiation, you will stop creating me-too products and focus on products that are unique in some way. When marketing understands the main concepts in pricing – like value, price segmentation and portfolio pricing – they will develop products or services that create more value for their customers which becomes more revenue and profit for the company.
Price often – In many industries, marketers are so focused on developing the next new product they stop focusing on the existing products. They use the pricing philosophy, set it and forget it. This is a big mistake.
Things change. The economy goes up and down. New competitors enter the market. Old competitors change prices. Competitors add new products to their portfolio. You add new products. Customers tastes and preferences change. Technology makes innovation possible. The Internet changes distribution and business models. Your price should be a function of all of these, so when they change you should revisit your pricing.
Actually, you should have people in your organisation who frequently review optimal pricing. They watch the industry. They evaluate key performance indices that are early warning signals to pricing problems. They monitor competitor behaviours. They are in a position to respond quickly to change.
What kind of company are you: “Set it and forget it” or “Price early and often“? The latter is much more profitable.
Pricing intelligence company Profitero works with retailers and manufacturers to help them increase sales and maximise their profits by using competitor price, promotions and stock information at scale. For more information on Profitero price intelligence and competitor monitoring, visit www.profitero.com or email firstname.lastname@example.org.