Pricing and Profitability Management: A Practical Guide for Business Leaders

What Comprises a Successful Pricing Strategy?

An effective strategy should reflect an integrated pricing framework that supports business objectives by capturing the value of an offering relative to its rivals and customer demand. The strategy should guide an organization's internal behavior as well as its external communications to the market for all pricing-related actions. A pricing strategy must be:

• grounded in data and fact rather than in anecdote and conjecture;
• aligned with overall corporate objectives as well as other functional strategies (e.g., marketing and sales); and
• flexible, adaptive, responsive, and monitored.

Grounding a Plan in Data and Fact

Many organizations believe a pricing improvement initiative should first define the overarching strategy, and then design the processes and analytics, which must conform to the strategy. However, a plan that is based solely on hearsay from the field or theoretical concepts of value is doomed to fail, regardless of how meticulous or accurate the subsequent pricing analytics prove to be. An effective strategy must start with a rigorous analysis of the relevant facts, including data about customers, competitors, market dynamics, and historical transactions. When all the information has been gathered and understood, it can be assembled into an insightful, cohesive, and operationally effective framework that will guide pricing decisions.

Because it can be tested and refined against a company's competitive and market landscape, ...