When it comes to pricing, there is a misconception that pricing is simply about raising prices or just setting the right price to achieve a certain margin expectation.

Having worked in pricing, product management, business development, finance and sales, I can tell you that it most certainly is not just about this.

Strategic pricing is about building a foundation for long-term profitable growth.

Your pricing strategy supports your business in achieving its corporate and marketing objectives. It has a significant impact on your financial results as well as your customers’ experience of doing business with you.

Pricing is about growing sales and margins by using strategies that capture the true value of your products and services. It enables you to develop products and solutions that add value to your target customers.

It is about creating value profitably.

It is about understanding customer needs and market dynamics, evaluating competitive alternatives and knowing how and when to satisfy those customer needs.

Pricing is also about recognising and accepting that your business cannot be everything to everyone and therefore you must be selective about which customers you choose to serve. A one-size fits all approach to pricing is detrimental to your business and your customers. It destroys value.

The objective of strategic pricing is to maximise profits by:

💎 Understanding value

🛠 Creating value

📣 Communicating value and

💰 Capturing value in your price

All within the constraints of your competitive environment, company costs and organisational capabilities.

The key principles of strategic pricing are that it is:

1️⃣ Value-driven: it requires you understanding the value to your customers and how value differs across market segments. Customers will not necessarily understand the value delivered by your products and so value communication is critical.

2️⃣ Pro-active: it is about changing expectations and ingrained behaviours amongst customers, competitors and employees by communicating and establishing consistent policies and not having a knee jerk reaction to customer and market changes.

3️⃣ Profit-driven: the ultimate goal of your pricing strategy is to increase profitability. It will require establishing policies that move away from ad hoc discounting and one-size fits all pricing to making difficult decisions.

Strategic pricing aligns with the overall business objectives and supports the business in achieving and delivering these objectives. It integrates information about costs, competition and value to customers across functions.

Pricing can make or break your business.

Are you leaving pricing to chance or are you investing in developing your pricing strategy and capabilities?

Done right and you will thrive.