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3 Things Every Pricing Team Needs to Get Right

Philosopher Immanuel Kant once said, “Experience without theory is blind, but theory without experience is mere intellectual play.”

Pricing is a complicated topic. It can get esoteric very quickly. But while we would like to say that you can ignore the finer intricacies, you really do need some head knowledge about three key areas.

Just as importantly, you need to be able to execute in each of these areas.

If you do these three things incorrectly (or not at all), just about every other aspect of pricing will fall short or fail. On the other hand, these areas also provide incredible leverage. If you improve one of these areas, you will likely see benefits that far outweigh the time and effort you put into them.

Here’s a quick overview and some resources that you can dig into for more information about each:

1. Price Segmentation

Segmentation is an incredibly powerful tool. Knowing how much a customer is willing to pay is the key to maximizing profit. And segmentation is the tool that helps you figure out just how much different customers will be willing to pay for your products and services under different circumstances.

You not only need to do segmentation, you need to get it right. Because getting it wrong can be disastrous. Here are some resources to help:

2. Differential Value Perception

Differential value has three different dimensions. First, you need to do some research and quantify the total value that you provide your customers.

Second, understanding that every buying decision is choice among alternatives, you need to determine how the value that you provide is greater than the value of those options, whether they are competing solutions or just maintaining the status quo.

Third — and this is the all-important point where a lot of companies fall short — you need to get your buyers to understand and agree with your evaluation of your differential value. Perception is reality in this case. Buyers aren’t going to pay more than they perceive the value to be.

For more insight, check out the following:

3. Point-of-Sale Execution

All of pricing’s hard work on segmentation and differential value can fall by the wayside if salespeople aren’t doing a good job at executing the pricing strategy in the field.

And unfortunately, pricing often has very little control over those final negotiation steps in the sales process. But that doesn’t mean there’s nothing you can do. Providing the right training and incentives to salespeople can go a long way toward ensuring success. These links explain more:

Yes, these areas are big weighty, topics that will require some hard work. But if you can understand the theory and execute well in practice, focusing on these three areas will yield tremendous dividends for your team and your company.

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