Pricing: Strategies & Processes
With SMC business consulting to the optimum price
Pricing has the maximum influence on profit margins
Businesses within a sector must permanent deal with the question as to why a customer ought to make a purchase. Comparative competitor advantages put businesses in a comfortable situation, but growing price transparency and increasing comparability of products and services also mean that in many cases, the price of the offer is increasingly in the spotlight when it comes to decision-making criterion. The general trend is towards price lowering in spite of rising quality. As a result, the price is a service which is demonstrably the most powerful lever to the increase of business profitability.
There is no one pricing strategy that suits every single business. Pricing as an instrument to differentiate vis-a-vis the competition differs from pricing when it comes to introducing a new product or entering a new market, or other parameters. Clever pricing creates competitive advantages.
We are convinced that the price of a product primarily ought to be influenced by its value from the customer's point of view and not the costs associated with its production. However, in particular in innovative sectors, research and development costs are often very high and product life cycles frequently too short to redeem costs.
We develop pricing opportunities on a variety of different levels, to identify patterns and economies of scale. All this is in tandem with sales, since this is on the one hand a key market expert, while on the other is a big stumbling block of any pricing project.
Together with our customers, we get on top of pricing challenges, international market analysis and customer surveys to develop pricing models and price elasticity. In this way we achieve profit, turnover and volume targets for different business areas.
Serious shortcomings in pricing systematics
Indeed in spite of the huge significance of price, relatively few businesses deal with pricing systematically. Thereby a great of profit potential is wasted. When it comes to pricing in your company do you primarily look to the competition and your own costs?
Professional pricing is neglected by the majority of businesses. The topic of pricing includes the following processes:
As the basis for any price management, price strategies for the respective products and services in individual markets, sectors and countries is to be determined. Pricing as a differentiation instrument with regard to the competition differs from pricing in introducing a new product, or entry into a new market. In contrast pricing strategies of “old products” in existing markets etc. is completely different.
Determine who in the business, when and on which basis - and using which instruments - is to decide on the best prices in the respective areas, and any additional people to be involved too.
Price systems are to be established on the basis of value-oriented pricing, which transparently reward positive customer behaviour, so the desired sales and revenue goals are attained too. Earlier this was often created “on gut instinct”. In current times leading businesses make use of big data. We support our clients with creating a suitable database.
Successful price management is based on a clever systematisation of individual price systems, all of which lead into a company-wide price concept. To that end, clear fundamental decisions are to be made, as to how the topic of price management is to be strategically dealt with.
Irrespective of own costs and the pricing structure of the respective competitor, the established benefits of the client and their willingness to pay are to be taken into account.
Sales have to be supported in the introduction of new price systems, in discussion with their customers. To do this they need supporting arguments and tools. We work closely with you to develop tools that secure long-term added value.
