Pricing Done Right

CHAPTER 5 Price Management

If the approach a firm takes to attract customers in the face of competition is considered its business strategy; and the manner in which prices are positioned, structured, and managed to accomplish the business strategy is considered a pricing strategy issue, then we still have to move from these lofty direction-setting goals to actual execution. Price management converts the firm’s business and pricing strategy into action.

Price management can be disaggregated into three types of challenges supported by a fourth challenge. These three types of challenges are market pricing, price variance policy, and price execution. To inform the price management challenges with facts, as well as to inform pricing strategy and perhaps even business strategy, there are pricing analytics. Pricing analysis underlies all the aspects of pricing, as shown in the Value-Based Pricing Framework.

Market pricing refers to the setting of the list price or margin, or at least the target price or margin, of an offering within a specific market. This is far more detailed and specific work than pricing strategy itself. In contrast, while pricing strategy may define where the offering is to be positioned relative to the competing alternative, market pricing converts that decision into a specific number. And whereas price segmentation may define an overall price structure, market pricing puts numbers to the price structure’s parameters.

Price variance policy refers to the determination ...