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Colin Coulson-Thomas, Visiting Professor at the University, gives his
top tips on pricing for recovery and growth.
1. First, assess the contribution that pricing makes to
the achievement of your business objectives. How effective is your pricing in
relation to that of your competitors? Do your colleagues understand the
strategic importance of pricing? Leaders do and they are more attuned to
factors such as perceived value that affect price sensitivity.
2. Are the right people involved in pricing decisions?
Make sure you consult those staff who are sensitive to customer expectations
and their likely reactions to changes.
3. Don’t overlook the pressures on people in the front
line to hit their targets. Make sure sales colleagues do not ‘buy’ orders.
Excessive discounting to secure orders can reduce profitability.
4. Be realistic about the potential to build prices.
Find out about how customers perceive your offerings. Delivering extra value
may justify a higher price but how easily could this be done and how long might
it take?
5. Differentiated, tailored and exclusive offerings
attract a price premium. Develop different versions of products and services to
suit differing tastes and requirements. Sell on value as opposed to price.
6. Ensure you use pricing to build closer relationships
with strategic customers and key accounts. For example, lock customers into two
or three year deals instead of one.
7. Make sure you understand the factors that influence
pricing decisions. Smart firms monitor trends and developments that might
impact on prices.
8. Price to achieve economic viability. Increase volume
to achieve economies of scale rather than reducing product costs to allow price
cuts or special discounts.
9. Make your firm’s prices easy to understand. Keep your
pricing structures simple and transparent. When customers can see the economic
implications of different options and additional elements, they may opt for a
more comprehensive package.
10. Take pricing decisions on the basis of evidence
rather than hunch. For example, before pricing products as a line rather than
individually, calculate whether a desired increase in profit overall would
exceed the costs of implementation and any reductions in profit on individual
products that might occur.
(September 2009)
