The 5 Key Product Pricing Strategy Lessons You’re Probably Not Following


Setting and executing a product pricing strategy can be an intimidating exercise. However, it does not have to be. There are 5 simple lessons that allow ALL companies to build pricing capabilities and know-how.

Lesson #1 – You Need To Get Off The Discounting Drug

Develop visibility and a clear understanding of what different promotional depths & activities will deliver in terms of profit. Define where money is being left on the table, and seek to reduce unproductive discounting. Establish rules-of-engagement on when/where to stop giving product price discounts & treat price discounts as a budgeted item. This will drive accountability throughout the organization.

Lesson #2 – Know That Preparation is Half the Battle

Ensure your organization has the right foundational pricing software, pricing models, and competitive pricing assessment capabilities. Without preparation, you will be getting into a game of high-stakes poker without knowing your cards.

Lesson #3 – Move Your Mindset from “Cost-Plus” to “Value-based”

Make the approach simple, methodical, and adhered to by all key decision-makers in the organization. The starting-point for defining a brand’s value is defined by its consumers. Try to align with your customers on the “value” of your portfolio. The core considerations in defining value are:

  1. Consumer demand… Elasticity
  2. Internal economics… Profit
  3. Customer View… Brand benefits to retailer

Lesson #4 – Don’t Spread the Peanut Butter

Taking a uniform approach to pricing strategy across your portfolio, will leave money on the table with some brands while putting others at risk. Brands within a portfolio have different profitability, and behave uniquely to pricing and promotional activity. Understand the elasticities of all key brands and packs and set strategy accordingly in taking a differentiated portfolio approach to pricing.

Lesson #5 – Develop Your Foundation for Setting and Executing Product Pricing Strategy

Your product pricing strategy checklist should include:

  • Build an analytic toolkit
  • Create visibility
  • Establish guardrails
  • Commit to consistency & fairness among trading partners
  • Develop “what-if?” scenario capabilities
  • Drive accountability

Building pricing capabilities within finance, sales and marketing, leads to a more courageous organization, successful customer interactions, and profitable growth.

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