Pricing and Profitability Management: A Practical Guide for Business Leaders

Critical Challenges Faced by Pricing Strategists

Most efforts to develop winning pricing strategies begin with admirable goals, but run aground during the implementation stage. Myriad problems crop up, from the availability of relevant market research data to the functionality of existing technology systems. This section highlights typical challenges confronting organizations and the actions that should be considered to mitigate them.

Challenge: Market Research Is Expensive or Unavailable

Interviewing customers and stakeholders directly can be costly in time and money. Companies launching new products often face this problem because extensive market research is required. In some cases, a product is so revolutionary that secondary research options (e.g., industry reports, news articles, or customer Internet forums) don't yet exist. For these situations, a proxy product launch can be used to shed light on how customers might react. For example, if a company is releasing a new trend-setting phone, then the pricing strategy, market conditions, and customer preferences revealed in the earlier launch of another breakthrough handheld device may prove relevant. Industry influencers can also be instrumental in understanding and predicting customer needs.

Challenge: Competitors Behave Irrationally

Some rivals understand the marketplace, their financial levers, and customer needs better than others. Smart sellers make shrewd pricing decisions to advance their strategies, while irrational ...