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Pricing Principles: Myths and Realities

Everyone has perspectives about pricing, some of which are simplistic, however strategic pricing principles have been developed through years of studying customer behavior and analyzing cause and effect.  Below are some common pricing perspectives we have encountered over the years, and the corresponding view at Strategic Pricing Solutions of the correct pricing principles:

Common Perspectives

Strategic Pricing Principles

The market sets the price; we sell to the market The market is determined by actions and reactions of competitors and customers.  Each transaction is an opportunity to influence the market – for better or worse
Sales knows where we need to be Sales knows their customers, not the market
Pricing is complex – part timers usually are not experts
Sales reps are paid on margin, so they maximize it Fear of losing a sale and lack of market knowledge frequently result in prices lower than necessary
If we lower prices we will make it up in volume Those economics rarely work
Price is the most important factor with our customers Price is important, but frequently not the most important factor
If we raise prices, we will lose volume Not all customers & products are equally sensitive to price changes
Our customers demand additional services but won’t pay for them Customers will pay for differentiated services if they provide value.
We don’t have the data to be more scientific Most order management systems have the transaction details needed to determine opportunities
Our business is too complicated to manage pricing at the customer level Shareholders expect managers to capture the value they provide to customers.  SPS can show you how.