1. They are “givens”. They are the environment within which you set a price.
2. They effect your optimal price. As these values change, your optimal price may change as well.
3. Pricing professionals have very little influence on them, but we must understand them to do our job well.
From this perspective, there is a 4th C that is often overlooked: Corporate Strategy. The CEO determines the overall corporate strategy, and pricing has a huge impact on the success or failure of these corporate objectives.
For example, I worked with a company where the corporate goal was to raise margins and average selling prices (ASPs). The pricing team was able to impact this corporate goal by managing the product mix, being more aggressive with prices on products that have high ASPs and margins and less aggressive on the other parts. The CEO set the strategic direction. The pricing team created a pricing strategy to help execute on it.
Other corporate goals could be revenue growth, profit maximization, market capitalization, market penetration or even social concerns. In each case, the pricing function impacts the outcome. Regardless of your corporate strategy, your pricing strategy should be developed to help achieve it.
The next time you read about the three C’s of pricing, remember there are really four: customers, competition, costs, and corporate strategy.
Do you know your corporate strategy? Does your pricing help or hinder your success executing that strategy?
Mark Stiving, Ph.D. – Pricing Expert, Speaker, Author
Photo by Stefan Erschwender