All companies seek price optimization value in business strategies. Many companies utilize pricing in daily interaction but aren't getting the best optimization. Value pricing strategies are essential, especially as technology continues to rapidly change. These unique challenges impact pricing optimization:
Short Life cycles
Declining Price Curves For End Products
Complex Go-To Market Paths
A Historical Bias Toward Marketing Speeds & Feeds vs. Customer Benefits
These challenges are root of many frustrating pain points. Businesses must make accurate and timely pricing decisions, be effective in managing the processes required to make offers and execute them through internal systems without error, in spite of any challenges. Historically, companies have addressed value capture in three ways. First, most companies should start by creating and educating a small pricing team. Carefully craft a team with relatively little authority compared to the amount of revenue or profit they will oversea. Secondly, most companies should invest in pricing execution software that automates the quoting and pricing approval processes. Pricing automation is an important step to improve overall pricing strategies and to better track profits and losses. While both of these suggestions are essential to developing clear values to pricing optimization, neither effort drives direct behavioral changes to the business. This can dilute the results because administering an approval process without maximizing their true value-add. Collaborating with the sales teams to craft product and pricing solutions that meet customer’s needs, which provide the profit margins for the company, to fuel the engine. Third, companies often address value capture by focusing on the cost side of the profit equation. However, focusing primarily on cost can result in downward spirals of steps to find redundancies and extract concessions from suppliers. This mode of operation is not a sustainable because when all areas of cost improvement are exhausted, companies often turn to the R&D and product development activities that led to success in the first place. What are ways your company practices pricing optimization value? Please share in the comments below! Learn more about increasing value for your business at our 27th Annual Spring Pricing Workshops and Conference in Chicago, IL! During May 3-6th hear directly from over 25 of the world's leading pricing professionals! Register your team TODAY!