Strategic Pricing Solutions works with clients to develop data-driven pricing strategies that are consistent with their business strategy.
We review the market, value proposition, product hierarchy, competitive positioning, customer segments, and current pricing strategies and architecture. We review historical results of the existing strategies, and identify pricing strategy options. We conclude with recommendations for enhancements or modifications.
Each company’s business strategy is a reflection of where they will compete and how they will win.
- Which markets, product types & geographies
- Their competitive advantages & disadvantages
- Their value proposition
Choosing and implementing a pricing strategy is more involved than just selecting skimming, penetration, or neutral pricing, or simply adding a margin to the product cost. First and foremost, the pricing strategy must align with the company’s communication of value to customers and prospects. The price of a product or service is another form of communication of value to customers. Setting prices lower than competitors can be a signal to customers that the product or service is no better than the alternatives. If the product or service is superior, low prices will simply erode shareholder value and may result in fewer sales.
Pricing strategies also consider:
- How specialized is each product?
- What alternatives are there within the company’s own product lineup?
- The price differences between the good, better and best within the product lineup should reflect the differences in value of those products to customers
- These price differences can also provide incentives to move customers toward your preferred product mix
- Where each product is in its lifecycle?
- Trying to get too much out of entry-level products or pricing too low on high-end products can both result in lower profits.
- Customer behavior and price sensitivity change as products move through their lifecycles. Pricing strategies should reflect those life-cycle changes.
- Customers are not all the same and, where possible, pricing strategies should reflect that.
- Can pricing be differentiated between customers, and if so, how should it be done?
- In environments with complete price transparency, differentiating prices is more difficult and subtle.
- In B2B environments, pricing is often individually negotiated and price differentiation happens naturally. However, it is critical that the price differentiation is a conscious choice based on the company’s competitive strategy and differences in value.
- What will be included in the price?
- Services, freight, installation, payment terms, etc. all deliver some level of value to customers. Market dynamics, customer behavior, and the ability to control these elements all factor into whether the services should be bundled into a single stated price or broken out separately.
- If charged separately, will accessorial items such as freight and installation have the same price to all customers?