Setting pricing strategies can be complicated, but doing it well is essential to the success of your business. In Wikipedia, you can find 23 different pricing models listed along with 9 laws of price sensitivity and consumer psychology. Many companies consider that seeming complexity, and decide they would prefer to simply figure out their costs and add a margin. They just don’t want to tackle that complexity. However, the companies that do it well simplify their pricing strategies to making some fundamental choices about where they will compete and how they will win. They ignore the rest of the noise until those basic choices have been made, and then make sure their pricing decisions are aligned with those strategic choices.
A friend, also named Scott, recently sent me an article Leading the Way that discussed the frequency of small lubricant competitors leading the way in price changes. The article, originally published in Lubes’n’Greases magazine demonstrated that independent producers increased prices of lubricants as frequently or more than the major producers. The article reminded me you don’t have to be the largest competitor to be a price leader.