Q&A: First Step to Revising Prices
Question: We’re a small organization without a formal “pricing” person or any real framework for how we gather and act upon pricing data we get from the market. What are some good tools, projects, practices we could use to begin introducing pricing management into the organization? – B
Answer: Excellent question B. Without knowing your product, market, sales channels, etc. it’s very hard to be specific… with ONE exception:
Learn how your buyers value your products.
Almost no company understands how their buyers value their products before we start working together. I can’t emphasize the importance of understanding value enough.
Most people think of pricing as a data-driven exercise. In some cases it is. In most cases it’s a strategic thought process that begins with how customers value your products. It’s almost impossible to make good pricing decisions when you don’t understand this.
You Can’t Understand How Buyers Value Your Products Until You Ask Them
My Advice: Go Talk to Tons of Customers
Every time you get a chance to talk to a buyer, ask them a bunch of questions. Here are several to consider. I phrased these all in the tense as though you are talking to someone who hasn’t purchased yet, but you can change the question and ask people who have bought from you AND people who bought from your competitor.
Questions to ask your customers:
- How will you make this decision?
- What capabilities do you think are most important?
- How will this product impact you?
- What results are you hoping to get?
- If you don’t buy from us, what will you do?
If they name a competitor in this process, ask these follow-up questions:
- How much do they charge?
- What do you like about their product that’s better than ours?
- What results do you think you could get from their advantages?
- What do you like about our product that’s better than theirs?
- What results do you think you could get from our advantages?
- Which way are you leaning?
Ask these questions to tens or even hundreds of buyers. You will get a very good feel for what value means to your market. That is the first and most important step in pricing.
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Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.