Pricing is … Your Last Move

Business is like a game.  You make a move.  Your competitor makes a move.  Your distribution channel makes a move.  Your prospects make a move.  You win when prospects buy from you at a profit.  The more profit, the greater the victory.

The strategy of winning any game is to look ahead as far as possible and then reason backwards to make your best decision (move) for the current situation.  In chess, you think several moves ahead, both for yourself and for your competitor.

The strategy for winning at business is the same.  Look ahead as far as possible and then reason backwards.  In the game of business, the last move is a prospect buying from either you or your competitor.  That was not your move.

Your last move is to set a price.  Product development happens very early.  Then marketing and channel development.  Then maybe direct sales and customer support training.  Because price is so easy and quick to change it is the last decision you make.

Typically a company does everything necessary to launch a new product and then, just prior to launch, finalize the price.  And then, if they find the price wasn’t good enough, they can change it.

Why do you care?  Read carefully.  This concept is important.

Price is your last move … strategy looks ahead and reasons backwards.  It only makes sense that people in product development and marketing and sales absolutely must understand pricing concepts in order to do their job the best they can.

Product development must know that value comes from differentiation.  How is their product different from the competition?  They must understand segmentation, developing different products for different markets.  They must understand good, better, best, allowing customers to segment themselves.  They must understand complementary pricing, razors and blades.  If they understand these concepts, they will create product strategies that can win with more customers.

Marketing must know that value comes from PERCEIVED differentiation.  Customers only value what they know and believe.  It is marketing’s job to help the customers believe, to communicate the value.

You get the idea. Everybody in the company attempts to create value.  The question is do they know how value is measured?  How it is captured?  Value is measured by what your customers are willing to pay.  Value is captured through pricing.

The lesson here – evangelize the concepts of pricing throughout your organization.  This will help them create even more value.

 

Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author

Read more from Mark in his book Impact Pricing: Your Blueprint for Driving Profits

 

Photo by dsb nola