commodities-pricing-strategy

Atenga’s CEO, Per Sjofers interviewed by Cheri Hill, CEO of Sage International Inc.

Today we are going to tackle the topic of pricing strategy. Which is emerging as the most important resource for companies to increase their competitive advantage. The vast majority of companies have spent years achieving gains through cost cutting, outsourcing, process re-engineering, and the adoption of innovative technologies. However, the incremental benefits from these important activities are diminishing and companies need to look at other areas to improve their business results.

Joining me today is, Per Sjofers, a thought leader in the world of pricing strategy, a prolific writer, international speakers, and Founder & CEO of Atenga Inc. - an organization of business people who bring experience from more than 70 industries & 500 projects to your company. They use in depth practical pricing research, deep analysis, and competitive intelligence to help their clients price their goods and services correctly, and make better business decisions.

First topic - I want you to define and share of course, your insight into what really is a pricing strategy.

“Well anybody who sells anything has a pricing strategy. Sometimes it is a very simple pricing strategy - more often it is a very simple pricing strategy where companies take their cost and slap on a fixed margin. They may peg their price to a competitor's OR we have the ever so popular method to figure out a price that feels good to whoever is setting the price.”

But that is really what you don’t want - When you are using these simple pricing strategies you leave masses of money on the table. And not only do you see your revenues become sub par, but so do your profits & sales levels.

The right pricing strategy is one that is aligned with your customers willingness to pay, and when you set your pricing strategy to that willingness to pay, it is not unusual to see a doubling of profitability at the same time as sales growth also doubling. And for those who have equity in these companies; this is really important because it can more than double their share holder value.”

You’ve helped some pretty large fortune 500 companies really look at that, “What is a customer willing to pay”?  And I think as a business owner, and certainly I hear it a lot, that people are afraid to ask for more money. And we have been conditioned that way, to set a price and the big box stores do the discounting. How do I really figure out what my research needs to cover? What is my customer willing to pay? And to actually feel good about it?

Well, pricing is certainly the most powerful marketing message of the benefit that you give to your customers, so it really depends on what your business is.

If you are selling a commodity product, than your wiggle room is fairly limited. And the challenge is to find ways to de-commoditize the product. That can sometimes be quite interesting when adding content. For example, Ink Jet printers are a commodity product. They are very low cost - and what HP has recently done is they started to bundle in a subscription to New York Times with their printers. So now they have added content to add value and increase willingness to buy for their printers. They found a way to de-commoditize themselves. And once you’ve done that, you gain some level of pricing power.