Do you want to:
- Take market share from competitors?
- Be more profitable than your competitors?
- Have higher customer loyalty than your competitors?
- Grow shareholder value faster than the market?
- Have cleaner, more manageable Revenue Recognition?
- Generate profits more efficiently than cost cutting (by a 3x factor)?
Sound good? Sound even better with minimal resources? Then dip your toe in the Strategic Pricing waters; it's pretty easy.
These results are proven repeatedly in academic studies and through my own painful, scarring pricing experiences over fifteen years.
Strategic Pricing leverages skills, activities and data that you already have but hammers them into a common framework, towards a coordinated goal. The "Pricing" filter (and process) is the rare cross-discipline lever that Executives can leverage uniformly to optimize most (if not all) organizational activities. (You're not doing anything interdisciplinary right now, are you?)
And Pricing is easy. You don't need Six Sigma, or Business Process Re-engineering, or the usual B-school impossible-to-implement theory.
Here are two effective pricing activities that will create a big impact right now in a volatile market.
1. Graph your current/core Product's list price model (units on the x-axis and aggregate Revenue on the y-axis.
- What do you see? A straight line? A curved line? Stair steps? Identify your true customer sweet spot(s), the typical number of units purchased.
- Is the model steep? So steep that your pricing really isn't credible for your larger customers (marginally larger sales discounts unhinged from your "Value proposition?")
- Is the line flattish? Such that your smaller customers (probably an indirect channel) aren't paying enough (to support that channel)?
- Are you more or less expensive in certain markets? Did you want to be? Do your features warrant a higher or lower price? IS YOUR FIELD TRAINED TO SELL THAT HIGHER PRICE? (Be honest, they probably aren't.)
- So again, your price model communicates very specific things to your markets. Are these messages what you thought they were?
- Maybe you want the new product more expensive to capture the inelastic market segments.
- Maybe you want the new product cheaper so you can shut down an older development cycle.
A word about "bundles." -- I "HATE" them...(but I love "volume" programs.)
- "Baked" hard-coded bundles will not survive the first typical Field negotiation, the requested substitutions will destroy your delicate Revenue Recognition policies; big chunks of revenue will get carved out.
- However, a carefully crafted, "approved" volume purchasing program will provide the Field flexibility and give you cover for clean revenue. You will have a repeatable, consistent Enterprise License Agreement program before you know it.
Brian's interest in pricing and licensing began in the early '90s at Borland, when the company defied centuries of economic theory to compete against Microsoft on price. You know what happened next.
Since then, at large and small companies, Brian has run Strategic Marketing organizations: 1) Market Strategy and Verticals 2) Corporate and Business Development 3) Pricing and Competitive - strategic skills that most companies lack or fail to coordinate or execute.
Brian began his career in M&A at JP Morgan, New York. You can contact him at email@example.com.