In my humble opinion, pricing analysis is sorely underrated from a strategic perspective. And it’s not just laypeople who are underestimating the strategic aspects of pricing analysis, either. Even hardcore pricing analysts who’ve been at it for decades can overlook the broader implications of the analyses they’re performing.
Sure, people get that pricing analysis can help identify and correct costly margin leaks. And yes, people recognize that pricing analysis can help influence more consistent and rational discounting behavior. And of course, people understand how these things can and do translate into more profit dropping to the bottom line.
And that’s all valuable, of course. But pricing analysis can also uncover something that, quite frankly, eludes far too many B2B companies today:
Pricing analysis can reveal a company’s real “strategic sweet spot.”
Pricing performance is an important strategic signal. The prices your company is able to command speak volumes about your perceived value and competitive differentiation in the marketplace. Simply put, where your perceived value and differentiation are weak, your pricing performance will also be weak. Conversely, your pricing performance will be stellar where your strategic position in the marketplace is exceptionally strong.
Therefore, rigorous analysis of pricing performance can identify the circumstances under which your company is rewarded most handsomely for the products and/or services it provides. In other words, pricing analysis can zero-in on the specific combinations of customers and offerings that represent your company’s best opportunities for profitable—and strategically sound—growth.
Why is this so important? Because a lot of B2B companies today are either just taking business as it comes, or they’re simply guessing about the business their sales and marketing efforts should seek to attract, acquire, and retain. Of course, this haphazard targeting approach can’t help but put a damper on overall performance as the company wastes time and resources chasing business it either can’t win, or can’t serve profitably.
On the other hand, when B2B companies are laser-focused on their true strategic sweet spots in the marketplace, profitable growth is a somewhat natural outcome, as the business being targeted has better performance baked right in.
The point is that pricing analysis can provide data-driven and market-based perspectives on some of the most strategic issues B2B companies are grappling with today. And for the most part, it’s just a matter of recognizing the broader potential and looking at pricing performance in a slightly different way.
Driving Strategic Decisions with Pricing Analytics
Most often, pricing analytics are only used to evaluate specific deals, identify pricing outliers, and measure price performance over time. But in the right hands, armed with the right questions, pricing analytics can serve a much more strategic purpose.