Step Two: Pricing the Customer: Questions for the Value Council
You can’t sell your way out of unprofitable business. No business is better than bad business. More businesses fail chasing sales, rather than profit.
––Gary Sutton, Corporate Canaries, 2005
When was the last time you worried that your firm’s prices were too low? When was the last time your competitors complained that your prices were too high? One of the vital roles of the value council is to experiment with different types of pricing while understanding that if it is going to err, it is almost always more advantageous to err with higher prices than lower ones. After all, if you are going to go bankrupt, it is much easier to get there from overpricing rather than underpricing.
It is far easier to establish a bad price than a good one. What constitutes a good price?
- Proper customer selection—there is no right way to value price the wrong customer.
- Understanding the customer’s value drivers—both the tangible (measurable) and intangible (immeasurable)—learned in Step 1, Chapter 28.
- A good price is always established when the firm maintains the price leverage—before the work begins (Chapter 7).
- The firm must know the cost to serve before it begins the work, not after. Knowing costs is useless if your customer does not value the services (Chapter 19).
- Knowing what attributes of your value proposition your customer is willing to pay for—to assist you in developing options.
- Not confusing mutual gain (discussed in Chapter ...