Pricing Strategy
Pricing Directly Impacts Business Success
Priced to Market. Priced to Sell. Priced to Profit.
Pricing your products and services can be complex due to a large number of critical considerations that directly impact your business success. When properly developed, the right price:
- Provides Proper Margin to Fund Business Operations
- Creates Interest to Learn More
- Rationalizes the Buying Decision
- Properly Communicates the Value of the Product or Service
The complexity of pricing results in many companies believing the misconception that if they don’t get pricing right the first time, they can simply change the price until customers are willing to buy. Companies who approach price in this manner often set initial prices too low out of desperation to sell, which affects both the company image and profit margin.
Price planning and efficiency can increase top-line growth by an average of 10% per year and increase net profitability by up to 20%.
(Source: Ivey Business Journal)
The Art and Science of Pricing Strategy
Understand. Plan. Execute. Analyze. Optimize.
Effective pricing strategy requires four components. Similar to a four-legged stool, you can get three ”legs” exactly correct, but neglecting the fourth will result in revenue instability. Atomic Revenue works with clients to apply all four core components to a price strategy in addition to validating price within a financial operations model.
Science
Price Calculation
Mathematical determination of costs of goods sold, cost of sales, margin requirements, customer acquisition model, and other key factors required to set a maximum and minimum price range.
Competitive Price Evaluation
Analyzes alternatives available in the marketplace, the presence of direct or perceived competition, how the calculation of price fits within the market framework, and how the company brand position matches that market position.
Art
Price Positioning
Evaluates how a target customer purchases similar goods and services as well as their cash flow and usage parameters, positioning pricing in a way that addresses potential sales objections.
Price Presentation
Recognizes that most companies offer pricing options, with a preference for which option a customer chooses, price presentation is the visual and contextual delivery of price options giving customers a choice while influencing buying decisions toward a company-preferred alternative.