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Pricer’s Points | January 2015

The “Pricer’s Points” blog series provides a forum for pricing professionals to share their insights and experience. Our guest bloggers share their knowledge about specific product or industry challenges, geographic complexities, strategies, tactics, and technologies.

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Pricer’s Points: Looking at everyday pricing as a consumer | Jesper Hansson

Pricer’s Points: Looking at everyday pricing as a consumer | Jesper Hansson

Whenever I get a chance, I always tell people not to base pricing on cost. Even Bart Simpson above is conveying the same message. However much of the pricing we are facing is cost based pricing. The most apparent when living in Asia is out everyday visit to the food courts. Last week I was standing at a stall in Singapore selling Thai and Vietnamese dishes. I’ve eaten there a lot of time but that particular day I was looking at the different menu options and there was 40 different dishes to choose from.

Gordon Ramsay would probably not like the multitude of food offered as it would pose a challenge to keep all the different raw ingredients but that wasn’t my first thought. My first thought was that it seemed strange that the menu had 38 different prices and all prices were in the range from $3.20 to $5.40. For me that is a clear sign that the prices are based on an estimation of cost and most likely a mark up of 100%, meaning that a green curry with steamed rice sold at $4.60 has a cost of $2.30. Then I started wondering how often the stall owner reviews his cost to produce and change his prices. He was there so I asked him and he said they estimated the cost of the different dishes in 2011 when the stall opened and the prices had been the same ever since. I talked to him for about 10 minutes after that and asked him if he had ever considered how much sales he would loose if he just prices all his dishes at $5. His reply was that he had never really thought about that. He also told me that he monitored how many of each individual dish he would sell per week – he had to in order to make sure he had the right raw materials to cook with over the course of the next week. I left that stall after having finished my fried noodles, wondering just how much money the owner might be leaving on the table every week. It could be thousands and I did give him a few hints on how to find out and how to measure customers willingness to pay.

Pricer’s Points: How to successfully move to a Value based pricing model | Martin Wennerblom

Pricer’s Points: How to successfully move to a Value based pricing model | Martin Wennerblom

Moving into value based pricing give a lot of added benefits for a company in terms of higher margins and better competitive position but the transition must be carefully planned and executed.

In this article I am explaining some of the important steps that should be put in place to successfully move to a value based pricing model and avoid falling into the commoditization trap.

The megatrend of today is the commoditization of most products and product segment and the consequence of this leads to price pressure and thinner margins. Driver of this behavior is of cause that companies recognize there is a market place and they are reacting to this by putting their own products into it as there is money to be made and someone else is paving the way. This is one of the market fundamentals in the market economy.

Pricer’s Points: 3 Selling Secrets for Great Prices from Liam Neeson | David Mok

Pricer’s Points: 3 Selling Secrets for Great Prices from Liam Neeson | David Mok

First, don’t lead with price. If you don’t know what the customer needs, don’t quote the deal – period! Like Neeson’s character, if you don’t know anything about the people you are dealing with and they’re shopping for price, then don’t do it. If you are leading with price, you are simply selling on price. Anyone can do it and selling on price is a fool’s game in most situations. The odds are that you are leaving millions of dollars on the table. To get it back, first sell the value and then the price, not the other way around.

Second, focus on solving the customer’s business problems. I recall a situation where I asked a top sales professional about what allowed him to stand out. Here’s what he said: I SOLVE PROBLEMS! Simplicity is so powerful. The difference between success and failure is solving real problems. If I ask, what is the business problem your customer is trying to solve, will you be able to tell me? If not, you really haven’t figured out what exactly is your value proposition. It is critical to determine what the “particular set of skills” you provide that is better than anybody else AND how you will “kill” the customer’s business problems?

Pricer’s Points: Pricing Strategies – Are You Charging Enough? | David F Lewis

Pricer’s Points: Pricing Strategies – Are You Charging Enough? | David F Lewis

Not too long ago, to my embarrassment, I learned I’d been pricing my service plans completely wrong. It pains me to think about the money that was unknowingly being left on the table. Of all the nuances of business and selling, pricing a product should be one of the easier parts.

A product doesn’t just have to be useful or meaningful if it’s going to be successful. It also has to be priced correctly. You’d imagine choosing the right price is just a case of calculating the cost of manufacturing and marketing, plus a little bit extra to gain a profit. But obviously it’s not quite so simple.

Pricer’s Points: Solving the Pricing Puzzle | P. Simon Mahler

Pricer’s Points: Solving the Pricing Puzzle | P. Simon Mahler

Setting prices for products and services should be simple–cover costs, make a profit, and appeal to customers. But there are more variables to the pricing formula than many new small business owners may realize.

“When you’re starting out, you may not have a good handle on all the costs you’ll incur,” observes Janet Attard, founder and owner of Businessknowhow.com. “Unless you have previous experiences estimating jobs in the same industry, you may have difficulty making accurate estimates of the time and/or materials needed to complete jobs. You also may not account for non-billable hours–the time you spend marketing and promoting the business.”

Other costs of doing business may also be overlooked–until you have to pay them. These include payroll and self-improvement taxes, fees for accepting cards, health insurance and other benefits, and a variety of overhead expenses.

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