Pricing Man Confessions – Pricing Rightly – How Pricing Affects Everything
The Guys dive into another best-seller for business owners, pricing man confessions. It’s one of the most important books an owner and/or price-setter could ever read. What every CEO needs to do: “Lead your company with a strict profit orientation. And keep in mind that price is the most effective profit driver. Good pricing has three prerequisites: create value, quality value, and communicate value. That is when you get the price you deserve, the price you need for a profitable business. And, last but not least, avoid price wars. If a company can resist the temptation of price wars and eliminate the stigma of market share losses, it can improve the profit situation for an entire industry.”
In Hermann Simon’s book, Confessions of a Pricing Man – How Price Affects Everything, the world’s foremost expert on pricing strategy shows how this mysterious process works and how to maximize value through pricing to company and customer. Ray and Zen take their usual tangential approach to reviewing books, with a few sidebars, and offer many considerations for business owners to build their pricing strategy. Comments and considerations are directly related to Mr. Simon’s material. If you’d like Ray’s crib notes, just fill out the form below:
Prices are ubiquitous, we pay them and charge them many times a day, often agonizing over them, often giving them barely a second thought. Managers who understand the underlying dynamics of price can turn that knowledge into high profits and a strong competitive advantage. The challenge is that the game of “price” is becoming more and more complex. Intense competition, the maturing Internet, and increasing globalization are causing massive, disruptive changes in how consumers perceive values and prices, and thus how seller need to set prices.
Ultimately the customer is only willing to pay for the value he or she gets. The challenge for any seller is to find out what this perceived value is and then price the product or service accordingly. The customer stays loyal only if the exchanges with the seller cultivate a lasting sense of fairness. Customer satisfaction is the only way to maximize long-term profits.
Prices determine how much money you make. That much is clear. Yet how much influence can you exert on prices, so that money isn’t tight and you don’t need to live month to month or quarter to quarter? And if you have that influence, what is the best way to wield it? Never run a business in which you have no influence on the prices you charge. Peter Drucker saw a clear link between pricing and profit and also sensed the same improvement potential. He understood profit to be the “cost of survival” and sufficiently high prices to be a “means for survival.”