Q&A: Pricing Goals for Mature Industries

Question: In a well-established industry setup, pricing is non-transparent. When asked to develop a global pricing strategy from the ground up, What are the top 3-5 key strategic goals to aim for 3-5 years? V.

 

Answer: Hi V,

 

I don’t really agree with your first sentence. In many cases this is true, but there are a lot of mature industries where price is transparent. Some examples include heavy equipment (Caterpillar), most consumer goods products, and office supplies. I will agree that in mature industries, price transparency reduces the ability for firms to capture profits, but that really isn’t the point of your question. Let’s get to the goals part.

 

Pricing

The most important answer to this question is… Align your pricing goals to your company’s goals. Your CEO has established a set of goals for your company. They may be revenue or profit growth, market share growth, retention growth, expansion growth, new market penetration, and the list goes on. These goals should be at the top of your pricing goals. Pricing can help the company achieve each one of these.

 

Goals

Next, here are the strategic goals I would adopt as a pricing department:

 

  • Increase revenue
  • Increase profit
  • Make margins more predictable
These are pretty high level goals. Let’s bring them down a touch and here is what I would focus on in almost all companies:

 

  • Use education and evangelism to increase the rest of the company’s understanding of value.
  • Help the product teams …
    • Articulate their differentiation and their value for both marketing and sales messages.
    • Implement price segmentation. This could be use cases or countries.
    • Create value-capturing product portfolios.
    • Monitor KPIs that show whether or not we are capturing value.
  • Watch for profit leaks in our systems.  Is the quote to revenue path solid or full of holes? Are we quoting fast enough?
Surely there are more based on your situation, but this is a pretty good list if I had to generalize. If you truly adopt one or more of these goals, you should be sure to write it out as a goal, meaning you should include a number, a metric and a date. Here’s an example: 10 product managers would have created a value table explaining the value of their product within 6 months.

 

What am I missing?

 

**Note: Mark Stiving has an active LinkedIn community, where he participates in conversations and answers questions. Each week, he creates a blog post for the top question. If you have a question, head over to LinkedIn to communicate directly with Mark.

 

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