By guest blogger: Christoph Meili at Input Consulting AG
If you ask a CEO if he has got a corporate strategy, he will smile at you. If you ask him about his price strategy, chances are high that he cannot explain to you how his company is dealing with pricing and price management. Our consulting experience shows that in many companies, pricing is not a strategic topic.
On the contrary all activities are often focused on the optimization of price setting, rebates and conditions in a truly operational manner.
The consequences of a missing price strategy are various:
· Missing link between corporate strategy and operational pricing
· Difficulties in determining the resources and capabilities required for a professional pricing
· Deficient guidelines for price setting and price changes
· Lack of efficiency in pricing decisions
· Missing objectives to measure and benchmark pricing performance
A useful and pragmatic approach to define your price strategy is to answer these five key questions:
1. Pricing goals: What are the objectives that should be achieved in the context of pricing?
2. Price positioning: What is the desired price-value perception in the market compared to the main competitors?
3. Price discrimination: Which price spreads can be realized if prices are differentiated between customers, channels, countries etc.?
4. Price behavior: What are the strategic guidelines concerning price behavior along product life-cycle and against changes in competitors’ prices?
5. Bundling versus individual pricing: How is bundling used in pricing? For example: are services included in the price of a product?
As a second step, your answers have to be transformed into guidelines for everyday pricing decisions.