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Price is a Verb | The Wiglaf Journal

After publishing Pricing Done Right, the most common question I have been asked is “What do executives get wrong about pricing?”  That is simple.  They treat price as a noun, not a verb.

The Failure of Price as Noun Alone
When executives treat price as a noun, it becomes just a number associated with an offering.  Price is just the amount an offering will cost a customer when it is treated as a noun.  The quicker executives identify that number, the faster they can concentrate on other, “more important” issues…in their mind.

But price is a highly important issue.  Some even say it is the most important issue facing a company.  Price is the answer the strategic business questions: What business should we be in?  Can we beat our competition in that business?  Will customers be attracted to our value proposition?  Who will derive value from our offering?  What value will customers get from our offering?  Can we extract our share of the value delivered?  Is it worth creating and delivering that offering?  How can that value exchange be improved overtime?

If those questions don’t go to the core of business strategy, I am not sure what does.  And investors know it.

Facts have been repeatedly demonstrated. A small change in price has a larger impact on profits than any other similarly small change in costs or market share.  A price changes impact stock values quicker than most any other strategic decision.  People lose jobs and investors lose money when price is mishandled, and the opposite is possible only when price is handled correctly.

Every week, I find one or two stories of pricing decisions in the news.  Some are good.  Others are bad.  The good ones tend to result of treating pricing decision making as a verb: the result of a well-considered research process and a decision that has been properly vetted by key departments across the organization.  The bad one tend to result from treating pricing as a noun: the result of a need to reach some goal quickly and get a number that “feels right” on an offering.

The Success of Price as a Verb
The correction to these failures is to properly treat price as a verb.  The verb of pricing refers to the decision and decision process used to determine price.

Once price becomes a verb, one realizes it is an action.  Like every other act of a company, it must be managed.

Read complete article here:

Price is a Verb | The Wiglaf Journal.