There’s lots of talk about optimizing the customer experience from a process perspective, but not much conversation from a pricing perspective. Pricing, as the article I link to below, is more than building in profitability above product or service costs. Achieving an ‘optimal’ price requires deeper analysis than most companies actually do. According to the Sloan Review piece, fewer than 5% of Fortune 500 companies have a full-time pricing function, and less than 15% of companies do systematic research on pricing. That, to me, was surprising. Here’s a clip from the article:
How could companies go about rethinking their pricing strategy? The first area that may require a fundamental rethink is the way companies set prices. Many companies have a significant opportunity to differentiate themselves from competitors by learning how to create, quantify, communicate and capture customer value by implementing customer value-based pricing strategies. A second area concerns price realization — that is, the process of translating list prices into profitable pocket prices. Here, many companies lack the information systems, negotiation capabilities, incentive schemes, controlling tools and sales personnel confidence leading to superior price realization. Small improvements in any of these areas lead to quantifiable results very quickly. (See “Next Steps for Improving Pricing Capabilities.”)
CEO involvement is a critical requirement for ensuring that changes in a company’s pricing strategy lead to a true change in the company’s culture. At the same time, the CEO must ensure that these changes are not seen, as too many failed initiatives are, as “just another project.” CEO championing, bundled with organizational confidence, new capabilities and transformational change are key catalysts to obtain pricing power.
A definite must read piece.