Archives posted in: Pricing
Companies that are just beginning to build a pricing team should initially focus on defining the first year’s problems the team must address. Is it a price execution, discounting, setting, or strategy challenge, which most needs to be addressed? In some cases, the performance metric should be something correlated to profits, revenue, and share.
MoreIf a customer doesn’t need to make design changes to change the chip in a socket they are likely to continuously engage with multiple competing suppliers – not just to get the best price but also to secure supply. In fact in some cases customers are reluctant to design in proprietary chips, as they believe that having a single supplier for a product is very risky!
MoreFor a company, a socket means a business. When they talk about winning a “socket” they mean winning a new business. For example let’s say a product uses a microcontroller – all microcontroller companies would be fighting to win the microcontroller socket inside that product and all other such products that use a microcontroller.
MoreAt a certain level, the method of accessing a certain music track should be a commodity — it is the track that matters, not the delivery mechanism. Instead of differentiating on price, platforms are trying to do so with exclusive artist agreements and various extras for the consumer, as well as additional marketing support for the artist.
MoreIn the price improvement strategy, firms develop the organizational capabilities to manage prices better. Pricing and discount management processes are developed. People are hired to drive those processes. Tools are acquired to accelerate achievements. Cultures are changed towards a profit and discount cautious mentality.
MoreAlthough reducing product contents, while maintaining price, remains a viable option for effecting a price increase, care should be taken to do it in a such a way to minimize the chances of a challenge on deceptiveness grounds.
MoreValue-based pricing talks about pricing based on whether a product provides more or less perceived value with respect to the next best alternative. In the case of professional services however there is a slight difference — since there is the “human touch” involved we can’t be sure whether the next best alternative is a true alternative at all.
MoreGiven the current currency fluctuations and country specific economic situations, what problems do they create for firms and how are prices supposed to be managed across boarders today? These are the pertinent questions facing many of today’s executives.
MoreCost-plus pricers believe in understanding the cost of making a product and then adding a profit margin on top of the cost to arrive at the price of the product. Value-based pricers on the other hand are not keen at looking at cost or a target mark-up. Instead they focus on realizing the value that the product brings to the customer and then pricing it according to the value.
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