Pricing an Existing Product

Research Analyst from well known firms have estimated that as much as 80% of products and services in the market are mispriced and that pricing policies can be improved to significantly optimize revenue and profits.  How do you do this?  What are the barriers?  What are the probable outcomes?  Read on…..

The first steps to optimizing prices of existing products are to take a hard look at your business.  Ask yourself the following questions.

• Is your pricing strategy based on the value it provides or the cost of the product/service?
• Do you know exactly where your profits come from?
• By customer?
• By Region?
• What is your discount policy?
• Do you know your product/service price elasticity? Cross price elasticity?
• Do you use the tools of price optimization like Price Images and Strategic Discounts?

If you answered no to any of the questions above then there is an opportunity for improvement.

What are the barriers?

We find that the only thing that stops a company from taking on the task of improving their pricing practice is inertia and uncertainty.  There exists sufficient evidence in the marketplace today about the significant impact that implementing a sound pricing policy has on the top and bottom line.  Here is a quote from one industry analyst:

"The results of organizations implementing pricing optimization have been significant.  Margin uplifts of 10% and profit enhancements of 15% or more have been the norm rather than the exception"

-Robert DeSisto
Pricing Optimization Boosts
Revenues and Profits
Gartner 2006

The unjustified uncertainty is largely around what customers will do in the face of a price increase. 

What are the probable outcomes?

The wonderful result of price optimization is that you have a level of confidence and certainty of ALL of the possible outcomes whether you raise or lower your price.  You will understand what will happen to demand, market share and profitability at each point on the demand curve.

How to Get Started with Best Practice Pricing

The first step is to understand where there are areas of opportunity for improvement in your business.  Atenga provides a free tool to do just that.  Simply by answering 59 questions you will be ranked against industry defined best practices across 8 distinct categories and you will immediately see where the areas for improvement lay.  If you would like to take it a step further, Atenga provides a service wherein one of our pricing analysts will interpret the results and make recommendations for improvement.

To take the assessment, click here.