A recent study by CFO Research revealed that over 80% of finance executives are currently experiencing pricing pressure–and many expect that pressure to increase over the next two years. Pricing pressure sure sounds like something we should all be worried about, right?
As natural as it is to be worried about increasing pricing pressure, that fear can often lead companies down a scary path. All too often, pricing pressure causes a company to lower their prices as a knee-jerk response. And when competitors start lowering their prices as well, you can quickly have a race to the bottom on your hands.
But some companies respond very differently. These companies see growing pricing pressure as a by-product of the fact that there is increasing pressure to deliver value. Simply put, customers are now demanding a lower price because they don’t fully recognize the value in what they’re getting.
This simple shift in perspective drastically changes how these companies respond. Instead of simply focusing on lowering prices, they start asking how they can provide more value. Or, better yet, they ask how they can more effectively communicate the value that already exists.
This perspective gives the marketing, sales and even finance teams at these companies the marching orders to proactively capture more value instead of simply reacting with lower prices.
So instead of worrying about pricing pressure, these companies worry about the pressure to deliver on value. And by responding to that fear, they stand a good chance at holding prices and margins steady–if not improving them both.
It sure beats succumbing to pricing pressure and guaranteeing that your prices and margins will fall.