More than just pricing

Price is one of the decisive factors when the market decides on an investment. Even so important that an incorrect price may cause the market to choose another product / solution even though its quality far exceeds its competitors as we all know, still so many companies are behind when it comes to Strategic Pricing.

“Even if you initially have set a correct price, the difference in revenue can be as much as 20-30% or more, just based on the structure in itself.”

The price is not a one-time deal to be forget after it is set. In addition to reflecting related costs, it is even more important that the price also takes into account the changing needs of the market, which has an overall effect.

Pricing is a crucial component that must correlate with the product’s net value, market needs, expectations and competition over the entire life cycle of product as well as including possible reinvestment’s. It also has a fundamental impact on Customers Experienced Quality. Incorrect pricing will therefore have a double negative effect as you lose both the expected benefit as well as creating a negative spiral, often unnoticed.

“It does not matter how skilled staff you have, how experienced they are, how good the product is or how good service you offer if the price does not reflect market needs, demands and conditions.”

It is unfortunately common among companies that they have incorrect pricing without being aware of it, since in lack of competence the wrongly done pricing strategy is interpreted as a correct one by, resulting in loss of revenue combined with targeting incorrect actions. A pricing strategy can be both static, flexible or a combination of both. The importance is the structured foundation that has to be based on the company’s overall strategic goals as well as a correct and thorough market analysis and know how.

Strategic Pricing is part of your Pricing Structure

Strategic Pricing is one of three important components when planning your basic Pricing Structure. Even though this particular example is best suited for B2B and more complex products/solutions, the principles can be adopted for any industry.

1. Basic Pricing
2. Strategic Pricing
3. Business Models

Planning your Strategic Pricing, must include all three steps in correct order, meaning you can not exclude the first step, Basic Pricing, before you plan your Strategic Pricing. When properly done, the structure can be adopted with built in flexibility often necessary when communicating and negotiating with fast moving market. One of the many benefits of a clear and well-thought-out structure and strategy, is that you both ensure continuous quality and image at the same time you as you have a stronger over all product/solution.

“A correct pricing structure and strategy make your business independent of few individual and ensures a high overall result within the group.”

A Pricing Structure may be more or less complex and they may differ widely from each other depending on product, solution and/or industry. But all businesses require a properly designed basic Pricing Structure based on the overall Strategy. 

If you have any questions or concerns, please contact us.



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