One of the strongest indicators of product/service value in the marketplace is pricing strategy. However, most businesses set their pricing policies based on arbitrarily estimates or "just below market" to ensure desperately needed sale.
This is the biggest mistake any business can make when using prices as a means to generate business. Pricing should be structured so that it strongly conveys chosen corporate image while ensuring solid long term profitability.
The keys to structuring sound pricing policies are up-to-date knowledge of your competition and deep understanding of internal cost drivers.
"Nothing is permanent except change" -- Heraclitus
Change is inevitable in business. From customers and staff to suppliers and industries as a whole, goalposts are constantly shifting therefore its vital to regularly update your business strategy to keep up within the industry.
Competitive Pricing Analysis
One of the simpler ways to analyse competition is first to review business directly competing with your products and services for example if your company markets garage door installations what are the other companies are providing similar services in your area?
Secondly, review other competitive products/service and brands; i.e. if you are distributing Fido mobile services, what are the other brand offerings in your area: Bell, Telus?
Thirdly, do not forget about competitors who compete for "same-purpose" dollars. If you are selling marketing print services what are the Internet Marketing services which are offered to the same customer segment?
Carefully consider, from the customer's point of view, all the alternatives there are taken into consideration when purchasing your brand. Knowing that, you can assure your brand provides real or perceived advantages over your competitors, beginning with those who market brands that most directly compete with yours.
Internal Cost Analysis
Gain objectivity by identifying which costs are supporting growth, as opposed to those which are simply maintaining the status quo and have no bearing on customer satisfaction and future growth by reviewing your business activities and processes.
Redeploy resources to achieve maximum cost savings while maintaining adequate quality levels in your products and services.
Review these costs periodically and make adjustments as required. Ensure that cost analysis is approached in a positive way. This will lead to improved morale and customer service.
Managing pricing effectively can be difficult at the best of times, an unpredictable economy has forced many companies to think about reducing pricing across the board, however while it offers a short term fix, measures like this can cause difficulties in the long term by destroying profitability and ruining brand image.
A better approach to managing pricing is not to cut it, but optimize. The goal is simple, maintain and improve brand image, while improving overall corporate profitability, by doing things smarter and more efficiently.
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