July 2005 Archives
I was trawling around looking for good information on pricing, and I chanced upon this article. It echoes work I did ages back, but it takes it a little further. It's a nice read, and might give you ideas. Here it is: Profit Parabolas: Bringing Science to the Art of Pricing
I think that a crucial bottleneck in their approach is that you need to have a hell of a lot of data about your competitor's pricing and cost structures. As we see, often enough the net price paid by a customer is 30 - 50% lower than the published list prices at any company.
I think that a crucial bottleneck in their approach is that you need to have a hell of a lot of data about your competitor's pricing and cost structures. As we see, often enough the net price paid by a customer is 30 - 50% lower than the published list prices at any company.
I came across a post on the ecademy website, from a practitioner of NLP on whether she should post the prices of her services online. But this is a general and important question, and needs to be answered on a case by case basis. The more commoditized your product or service is, the more reasonable it seems to publish prices. My opinion is that publishing prices is not right, and pricing need to be based on the value that your product or service provides them. To give you a quick and dirty look at how you could go about such a decision:
The steps to effective pricing are
If of course both answers are no; you could go out and publish prices. The moment you publish your price, that price becomes a list price, and customers will start negotiating for price discounts from that price. More importantly, you need to start innovating in your service to see if you can find other reasons to increase the price you have set.
Once you have found these reasons and add-on capabilities to your service, create a split level price, where you drop your original price of the basic service package a little bit, and publish a new price as well, which is slightly above the original price.
I hope this helped a little bit. I have a more comprehensive document on Optimal pricing on my website that you could look at.
The steps to effective pricing are
- to quantify the value of your service - as seen by the customer
- to set up a process whereby you can demonstrate this value to your clients
- to motivate your sales channels to recognise this price in final achieved price.
- Ask yourself if you have a homogeneous customer base?. If there are differences in the customer base as regards how they buy, and how important your service is to them - you need to set up different prices for each of those groups.
- Look at your track record of previous sales to see if some customers are willing to pay more for your product than others.
If of course both answers are no; you could go out and publish prices. The moment you publish your price, that price becomes a list price, and customers will start negotiating for price discounts from that price. More importantly, you need to start innovating in your service to see if you can find other reasons to increase the price you have set.
Once you have found these reasons and add-on capabilities to your service, create a split level price, where you drop your original price of the basic service package a little bit, and publish a new price as well, which is slightly above the original price.
I hope this helped a little bit. I have a more comprehensive document on Optimal pricing on my website that you could look at.
I got this from Christian Mayaud's blog. It seems too good to not share this on with others.
- ArunBusiness 2.0 :: Magazine Article :: Features :: The CEO's Secret Handbook
Swanson’s (Un)written Rules of Management
by Bill Swanson, CEO | President, Raytheon
- Learn to say, "I don't know." If used when appropriate, it will be often.
- It is easier to get into something than it is to get out of it.
- If you are not criticized, you may not be doing much.
- Look for what is missing. Many know how to improve what's there, but few can see what isn't there.
- Viewgraph rule: When something appears on a viewgraph (an overhead transparency), assume the world knows about it, and deal with it accordingly.
- Work for a boss with whom you are comfortable telling it like it is. Remember that you can't pick your relatives, but you can pick your boss.
- Constantly review developments to make sure that the actual benefits are what they are supposed to be. Avoid Newton's Law.
- However menial and trivial your early assignments may appear, give them your best efforts.
- Persistence or tenacity is the disposition to persevere in spite of difficulties, discouragement, or indifference. Don't be known as a good starter but a poor finisher.
- In completing a project, don't wait for others; go after them, and make sure it gets done.
- Confirm your instructions and the commitments of others in writing. Don't assume it will get done!
- Don't be timid; speak up. Express yourself, and promote your ideas.
- Practice shows that those who speak the most knowingly and confidently often end up with the assignment to get it done.
- Strive for brevity and clarity in oral and written reports..
- Be extremely careful of the accuracy of your statements.
- Don't overlook the fact that you are working for a boss.
- Keep him or her informed. Avoid surprises!
- Whatever the boss wants takes top priority.
- Promises, schedules, and estimates are important instruments in a well-ordered business. You must make promises. Don't lean on the often-used phrase, "I can't estimate it because it depends upon many uncertain factors."
- Never direct a complaint to the top. A serious offense is to "cc" a person's boss.
- When dealing with outsiders, remember that you represent the company. Be careful of your commitments.
- Cultivate the habit of "boiling matters down" to the simplest terms. An elevator speech is the best way.
- Don't get excited in engineering emergencies. Keep your feet on the ground.
- Cultivate the habit of making quick, clean-cut decisions.
- When making decisions, the pros are much easier to deal with than the cons. Your boss wants to see the cons also.
- Don't ever lose your sense of humor.
- Have fun at what you do. It will reflect in your work. No one likes a grump except another grump.
BTW, Raytheon will send you your very own copy of Swanson’s Unwritten Rules of Management by US mail (That’s right — Raytheon supports our postal workers) if you fill out their online request form (I guess “The CEO’s Secret Handbook†is about to become a little less secret)
