Pricing is one of the most important elements in your business strategy, it determines your sales, profitability, and growth. These days pricing needs to be real time, flexible and personalised to your customers and products.
Having a planned pricing strategy is going to reward companies that get it right. So why is it that so many companies don’t invest in this area? Instead they are building their cost to net pricing and discount off that. Pricing is a fine instrument, to see it as anything less is going to eventually result in a point of weakness.
What’s the point of having a pricing strategy with no way to execute it? No point at all!
Make instant changes to your prices when costs change
Okay – the first rule to an effective pricing strategy is not to erode your margin when your cost price fluctuates. Some industries are extremely price sensitive, some have raw materials that change in cost weekly – even daily. Without any means to dynamically adjust your sales price based on your cost of goods you’re at the mercy of margin volatility.
This is all good in theory but what about companies that have many places and ways to derive a price depending on the sales channel. That is simple – change it. With a centralized pricing tool there’s no need to keep pricing in disparate applications. When a new price is available, you should be able to make those changes instantly. This means your Sales team will have full confidence in the prices in front of them.
Have the ability to offer promotion mechanics that persuade buying decisions
If pricing discounts are part of your pricing strategy, then being able to apply them at the time of sale is crucial. Your price strategy should outline what kinds of price tactics you can employ to persuade buyers of your products or services. We are well past the off invoice discount, there are many more ways to price promote.
Empowering your sales team to make pricing decisions within guardrails and apply discounts at the time of sale, means your sales team can price on the fly and beat any competitor’s price. A pricing tool provides complete control over the discount value and application to protect your margins. A complex pricing strategy need not be complicated, a pricing tool can manage the complexity for you.
Personalized pricing strategies
Without adding more complexity you can choose to apply custom pricing to groups of customers or to products in order to recognize favorable terms. For example, stepped, inclusive and direct volume breaks are all ways to personalize pricing based on the kind of order a customer is placing. You want to reward and encourage, these are strategies to help you change the regular buying patterns and behaviors.
The C-Suite is also becoming more and more interested in pricing strategy. This means pricing managers and experts need to be able to justify their pricing and promotion decisions. If you’re in charge of pricing you need to make it clear why one company has a different rate than another. They could be out-performing the other customer who received a lower discount, or they needed to beat a competitor’s price.
Companies spend time and money building a pricing strategy that will boost their competitiveness. A pricing tool that can execute your pricing strategy allows the C-Suite to see the benefits of a pricing strategy in reality. And as a result pricing managers and experts are able to show which parts of the strategy worked and which parts did not.