Most companies could benefit from more effective pricing. According to Prof. Colin Coulson-Thomas:
Coulson-Thomas examines why some companies are able to charge more than their competitors for essentially the same product. He explains: “Charge too much and orders are lost, while charging too little erodes margins and may give an impression of low quality.”
The Professor feels pricing deserves greater attention “Obtaining higher prices ought to be a top priority of entrepreneurs. Yet often they agonize over perfecting what is sold and then take quick pricing decisions based largely on guesswork.”
Coulson-Thomas has persuaded 73 companies to reveal their pricing strategies, tactics and practices. The firms surveyed provided data on 127 factors that could affect pricing decisions. The findings set out in his report ‘Pricing for Profit’* suggest more effective pricing could boost the profitability of many companies.
Comparing the companies that are most successful at using pricing to achieve business objectives (the leaders) with the least successful (the laggards) revealed stark differences between the two groups. .
Coulson-Thomas finds: “Leaders understand the strategic importance of pricing and are more attuned to factors such as perceived value that affect price sensitivity. They involve a wider range of people in pricing decisions.”
The Professor warns “Marketing and sales should contribute to pricing, but left to themselves they may be tempted to ‘buy’ orders. Offering discounts may be regarded as a softer option than differentiating, tailoring and delivering extra value to justify a higher price.”
Coulson-Thomas finds that: “Leaders sell on value as opposed to price. They are more likely to segment a market-place and take a long-term view. Laggards tend to be defensive, for example cutting price to hold onto market share.”
The cost drivers of leaders and laggards are very different. According to Coulson-Thomas, “Leaders are five times more likely to increase volume to achieve economies of scale. They are also more realistic when allocating costs and more likely to understand the costs attributable to a particular offering.”
Overall, according to Coulson-Thomas:
The Professor points out that: “Leaders keep their pricing structures simple and transparent. Increasing an offering’s value and the extent to which it is unique or special enables them to price for value. Differentiated, tailored and exclusive offerings attract a premium. Leaders strive to add value to their core offering, develop a reputation for service and use pricing to build closer relationships with key customers.”
Coulson-Thomas concludes: “Overall, leaders put greater effort into pricing. They use a wider range of sources of price information, keep their finger on the pulse of external opinion, and review their approaches as circumstances change.”
* ‘Pricing for Profit... the Critical Success Factors’ by Colin Coulson-Thomas can be obtained from Policy Publications. To order the report: Tel: +44 (0) 1733 361 149; Fax: +44 (0) 1733 361 459; email: colinct@tiscali.co.uk or visit www.ntwkfirm.com/
Prof. Colin Coulson-Thomas, author of ‘Pricing for Profit’, has reviewed the approaches to winning business of over 100 companies and spoken at over 200 conferences in approaching 30 countries. He can be contacted by Tel: +44 (0) 1733 361 149; Fax: +44 (0) 1733 361 459; email: colinct@tiscali.co.uk or via www.coulson-
