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Pricing’s Top Priority…by Far

In pricing, it can be challenging to stay focused on what’s most important. There are so many different aspects we can think about; so many different dimensions to consider; a thousand different things all competing for our attention. It’s really easy to get so distracted by all the traffic around us that we forget where we’re going.

And on occasion, we all need someone to say, “Snap out of it!” so we can get our priorities back in order. Walter Paczkowski helped do this for me in a recent Expert Interview for the Journal…

Walter is the Chief Data Scientist at Data Analytics Corp., a trained economist, and the author of “Pricing Analytics: Models and Advanced Quantitative Techniques for Product Pricing“. In the Expert Interview, we discussed his new book and a variety of other issues, from measuring price elasticity and using statistical models to dealing with organizational change and the bane of cost-plus pricing.

About halfway through our conversation, I began to ask some questions about execution and implementation. Should you factor in the capabilities of the sales team? What about the IT systems and infrastructure? Do the execution capabilities of the business itself set some parameters?

Now I’m paraphrasing a bit here, but at this point, Walt had to remind me…very diplomatically…about THE pricing priority…

Rafe, I’m focused on the number. Many people will put a lot more emphasis on the implementation than on developing the price points.  Implementation is important, but at the end of the day you need a number. And that number is the most critical piece.

And he’s absolutely right, of course!

Developing the most effective price-points should always be the number one priority. After all, the price-points themselves are where all of the vaunted “power of price” actually comes from. From there, implementation and execution are secondary issues—i.e. issues to be addressed after you’ve figured out the ideal price-points to put into the marketplace.

Sure, you might have to make some compromises here and there as you move forward with execution. Your systems and infrastructure may require some modifications to be able to differentiate prices in the ideal way. And you may have to accept something “less than ideal” in the meantime.

But without those “ideal” price-points in mind, you’ll never really know what you should be aiming for…or what you might be compromising away.

Yes, price execution is important. But relative to developing the right prices in the first place, implementation and execution are not even in the same league. As I was reminded in the interview with Walt, we should all strive to remember that “pricing” is about “the prices”…and everything else is secondary.

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