Pricing Basics
What is pricing?
We all have seen price tags in the stores. Price is a value that is attached to a product or service. In the modern digital world, price results from complex calculations that require a variety of inputs, data, risks evaluation, and a deep understanding of customer willingness to pay. That’s why companies need to develop a pricing strategy if they want to compete in the market and grow their profits.
A pricing strategy considers segments, ability to pay, market conditions, competitor actions, trade margins, and input costs, amongst others. It is targeted at the defined customers and against competitors.
Why is pricing important?
Pricing is very tightly connected with performance. The customers' perception and satisfaction concerning products, services, company, or brand of the supplier are reflected in their willingness to pay.
In pricing, the company with more accurate data wins. Successful price management requires exact knowledge about competitive advantage, costs, product segmentation, market conditions, and growth opportunities.
Price is an important profit driver and a key lever for margin improvement.
Why is pricing hard?
Cross-functional collaboration is needed (marketing, sales, product management, etc.)
Absence of the fitting processes and organization in place
No transparency between different parts of the company
Data quality issues and very poor automation
How to define the best strategy? How often to adjust it? Which pricing strategies best fit our product?
Training to expand your pricing knowledge
Interested in getting more understanding of the pricing?
We suggest going through our video courses in Pricefx Learning Hub.
To start Pricing Concepts 101.
To get more insights into pricing strategy: Pricing Concepts 102.
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