Our pricing consulting experience spans 30 years and covers B2B and B2C industries as diverse as:
Cinema (ticket and food, including dynamic pricing)
Consumer household goods
Telecommunications (fixed and mobile, devices and services)
Pricing varies from picking the right price for a single product, to complex optimisation relative to operational options, or dynamic pricing where adjustments are made in real-time to maximise returns based on data about real or expected demand. Different approaches are suitable for different businesses – contact us and we'll find the right approach for you.
Examining the common patterns across our experience, we modestly proclaim 4 Laws of Pricing that seem to hold...
1. Never get involved in a price war in Asia*. Or anywhere else.
A price war usually has several losers, and no winners.
In theory, it works if you can take out a competitor. In practice, even then you may never re-gain the costs of the war, because customer price expectations will be set lower.
2. Think of pricing as a secondary competitive lever, not a primary one
This does not mean that pricing is low in its impact on profit – it can have a strong and immediate effect.
But it is 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.
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.