Pricing Done Right

CHAPTER 1 The Value-Based Pricing Framework for Getting Pricing Done Right

Every offering of a firm and every transaction that firm has with every customer has a price. That price may be the result of a lengthy deliberation that includes market research, competitive dynamics, highly researched algorithms, intense customer negotiations, and torrid management discussions, or just a number that popped out of someone’s head. Somehow, every transaction gets priced.

That price represents a decision. A decision by the firm that reflects its business and customer engagement strategy, the unique positioning of the product offering within the market, the firm’s current needs, the information the managers hold, and the biases and incentives of the current managers. Somehow, pricing decisions get made.

That price impacts many functions within the firm as well as customers and competitive dynamics outside of the firm. As such, sales, marketing, finance, operations, and even legal will want to have a say in pricing decisions. Somehow, people are engaged in the decision-making.

But how should prices be determined? What should inform pricing decisions? Who should be engaged in those pricing decisions?

The job of management is to get the right people doing the right thing at the right time toward the right goal. The managerial challenges mentioned above in pricing are well known. What isn’t well known is how they should be addressed.

Managing businesses means getting things done through other ...