At Strategic Pricing Solutions, our philosophy holds that all of our work will adhere to the strategic pricing principles we consider to be best practices. Our pricing methodology is driven by that philosophy and includes the following best practices:
- Pricing strategies must be aligned with business strategies. Conflicts such as competing on the strength of best technology yet offering the lowest price will confuse customers and destroy value.
- Pricing strategies, tactics, and individual pricing decisions should be driven by the data.
- Price to value, not cost. We also believe that the value equation usually varies among customers, and pricing should match those different levels of value – turning customer value into shareholder value.
- Customers should be segmented and products should be stratified. That means they should be organized into groups that tend to behave similarly in terms of price levels and reactions.
- Identify the drivers of value within the different segments and product groups.
- Customers are not equally price sensitive and individual customers do not have the same level of price sensitivity across all products. Prices should reflect those differences.
- Exception management processes are required, because no model is perfect. However, exceptions should not be the rule.
- Incentives must be aligned.
- It is critical to monitor, evaluate, and report on pricing effectiveness, and appropriate adjustments should be made.
- Continuously improve.
- The entire organization should have a shared understanding of the company’s pricing principles, strategies, and processes.
- If you’re interested in how your company matches up against “Best Practices” in pricing, check out our self-assessment tool.