The Goal Is Crucial to Pricing

Sometimes, I have to be reminded of the obvious. Duh!

Earlier, I was coaching a company on pricing. As I was listening to descriptions of their customers, their channels and the problems they solve, my mind was swirling with ideas. Let me tell you, these ideas were brilliant. They were amazing … almost.

After probably 30 minutes of conversation, I asked, “What’s the goal? Is it to make profit quickly or penetrate the market to build a long-term, profit-producing business?” You see, my brilliant ideas all had to do with earning more profit. Of course, they didn’t say either of these. Instead they said, “We want to disrupt the market, so we can dominate it and have a huge market capitalization several years from now.”

Oh! That’s what you’re trying to accomplish. All of my original brilliant ideas … useless.

The conversation changed. We shifted it from making profit to being about how to price to penetrate the market as quickly as possible—all while showing investors that they can make profit and without being so cheap that buyers will think they are low quality.

After working with so many established companies who had the goal of maximizing -erm or long-term profit, my mind immediately went in one direction. However, given this new information, everything changed. It was a great reminder that the goal is crucial.

Here’s the lesson. Start with your goal!  Be clear. Be explicit. Your goal should drive your pricing decisions.