Pricing Done Right

CHAPTER 4 Pricing Strategy

There are four pricing decisions that senior executives face in the strategic pricing area. These strategic pricing decisions require executive attention because, as an input, the actual pricing strategies chosen need to be aligned with the chosen business strategy to exploit or enable the development of the firm’s relative competitive advantage, and, as an output, the information gathered in developing these pricing strategies informs the range of business strategies that may be successful.

These four pricing strategy issues are:

1. Price positioning
2. Price segmentation
3. Competitive price reaction strategy
4. Pricing capability

Each of these strategic pricing decisions is directly dependent on and influences the firm’s business strategy including the customers it serves, its competitive engagement, and its company strength. As such, they deserve senior executive—if not boardroom—attention and should engage the entire executive suite. Rather than having pricing reactions drive their business, leading firms are using their business strategy to proactively drive their pricing strategy.

Price positioning directly reflects the firm’s customer acquisition strategy in light of its competitive and company strategy. Price segmentation drills down into the firm’s customer strategy while also reflecting its corporate capabilities. Competitive price reaction strategy is a direct consequence of the firm’s competitive strengths. And pricing capabilities and their development ...