Our pricing consulting experience spans 30 years and covers B2B and B2C industries as diverse as:
Telecommunications (fixed and mobile, devices and services)
Examining the common patterns across these businesses, we modestly proclaim 4 Laws that seems to hold in most cases.
1. Never get involved in a price war in Asia*. Or anywhere else.
A price war usually has several losers, and no winners.
Only works if you can take out a competitor, and even then you may not re-gain the costs of the war.
2. Think of pricing as a secondary competitive lever, not a primary one
Better to win by delivering what the customer wants, rather than by making it cheap.
When you use price, use it intelligently. Use aspects of price that the customer values (or ignores), or focus on most (or least) price sensitive customers, rather than discounting (or increasing) prices to all.
Sometimes you can find a breakthrough approach as part of a well thought through proposition. e.g. where a lower or simpler price unlocks a lot of volume, or a proposition that meets a deep-seated need enables a higher price.
This does not mean that pricing is low in its impact on profit – it can have a strong and immediate effect.
3. Customers will always say your price is too high. So will your sales people.
Market research on pricing is difficult.
Use observation or experiment to determine price sensitivity where you can.
4. Pricing is not static. Keep learning and adjusting.
The best pricing strategy includes a continuous cycle of review and adjustment.
Copyright Red Kite Management Consulting 2018.
Not to be used without permission and attribution, please ask us first.
"You have added a lot of value to our business during the first phase of our partnership and I'm confident you will continue to do so."
– Chief Commercial Officer of consumer leisure business after first stage of pricing project which was then rolled out successfully to 3 other countries.