Smarter Pricing: How to capture more value in your market

Chapter summary

• There are three approaches to pricing:

  - basing prices on costs

  - following the competitor

  - establishing what the market will bear.

• Finding out what the market will bear is critical to ensure that products and services are not under-priced and that value is not left on the table. One way of testing what the market will bear is through auctions. For most businesses, interpreting historical sales data and undertaking pricing research are more practical approaches.

• Customers are often unable to answer honestly the question: ‘How much would you pay for this?’ Consequently, pricing research is designed to deflect attention away from the price itself. Rather, it attempts to discern the customer’s perception of value. There are techniques ...