With few exceptions, most businesses use an outdated approach to pricing their goods and services. Whether they sell manufactured items, wholesale or retail or even provide financing, the conventional wisdom surrounding pricing was created in the late sixties and early seventies – a time when profit was evil.

The conventional wisdom is built upon following the lemmings, built on fear that customers will leave you if you charge too much, built on ideas that you can buy market share by being the low cost provider,  built on notions that need to be swept away.

What is that conventional wisdom that stifles innovation in pricing? It has many faces like strict adherence to a notional margin number; like cost plus pricing; like customers buy on price considerations only. Successful companies are finding ways to break that mold.

Just look at the banks. They have done a terrific job of convincing us that the interest rate is the sole criterion for choosing a lender. But I can tell you that there are other considerations like the term, amortisation period, balloon payments, fees and renewals.

The point of this discourse is to convince you to take an innovative look at your pricing strategy. You have been to sales training, correct? And you have paid attention to doing the job right, the first time? Well sales and marketing are the promise to the customer. Operations is the delivery of that promise. But pricing makes or breaks a bottom line.

What would happen if you could be the price leader and charge 25% more than your competitors?  I know… Your first thought is that all your customers will head for the nearest exit. If that is your issue then you need to invest in your branding. Apple conducted an experiment that showed that if they raised their prices, only 20% of their customers would leave. Burberry, maker of luxury overcoats did the same and doubled their prices deliberately in order to lose 20% of their customers.

But what if you could keep your pricing more or less the same and double your bottom line tomorrow by innovative use of pricing strategies?

ESTIMATING: Do you WAG, SWAG or use a Stick?

Originally published by Cast Polymer Connection, Fall 2017.

In so many small businesses goods and services are priced based on guesswork – WAG method (the Wild Ass Guess) or add just a few numbers for SWAG (a Scientific Wild Ass Guess). Perhaps you use the STICK method where every stick and nail is costed out? Why don’t they work – and why do the always result in C minus profits?

WAG is an experience based method for pricing where trial and costly errors have already taken place. The assumption is that if for the past ten years, it has cost $5000 to renovate a bathroom and presumably it will always cost $5000 to renovate a bathroom. Faced with creeping labour costs or perhaps sudden spikes in the price of plumbing fixtures, this method is frequently unable to change. Faced with a new competitor in the market who is willing to undertake the same bathroom renovation for $3500, the WAG method practitioner doesn’t know what to do. There is simply too much information that must be kept in the estimator’s head to stay current and remain competitive yet profitable. Worse yet, estimators are human and tend to respond to the last comment they had from a customer. If that comment was a customer saying the price was too high, then the price on the next job will drop. If the business owner is also the estimator, then the price can reflect not value to the customer or even costs, but the threadbare state of the bank account at the time.  Sound familiar?

SWAG method, as the name implies, has some numbers to back up the experience based approach. “OK, so that job will take 4 men 5 days to complete and I pay them $20 per hour. With labour cost at $3200 I then add $3200 for materials and then $3200 for profit, that should be about it.” This rough and ready method does not take into account travel time, overhead and management costs, payroll taxes nor a fudge factor in case things go wrong. This job might actually lose money.

The STICK method is the name given to the clumsy and time consuming method of working out the costs of each and every nail, foot of strapping, 2” by 4”, pot of paint and labour to the nearest 15 minutes to arrive at a total cost. It is very time consuming. In fact, the typical delay from computer bashing can often be the deciding factor in whether or not your company gets that job.

STICK is, in fact, an adaptation of industrial manufacturing cost accounting methods to service providers and custom builders. I have seen some very elaborate spreadsheets meant to cope with the vast amount of information. The advantage to this method, having gone to the trouble of detailing every aspect of this “virtual build” is that, if and when the customer says “Okay”, you have a bill of materials and a plan for the carpenters.

The disadvantage is that, having committed so much time and effort to the quote, the price is not easily altered to reflect customer expectations. In other words, if the quote is $7000 and the customer’s budget does not extend beyond $5000, you cannot easily   find the savings to meet the value expectation. There is simply too much information on the table to alter the quote quickly. The only line item that can easily be altered is the bottom line and doing so may mean the job makes no money. What a dilemma!

What to do? Estimating Solutions

Estimating software

Increasingly there are industry related packages for estimators. Many of them utilize the power of computers and spreadsheets to manipulate large quantities of information without error. This is the STICK method on amphetamines.

The best place to look for software packages is in trade magazines and other publications. If you choose this approach to estimating systematically and correctly, it is always good practice to have a test run of the software: entering data from an existing quote to see if the numbers work. If the software is truly sophisticated, then it will also create a bill of materials for your purchaser, saving you hours of time.

Estimating books – OEM and industry service providers

Significantly, there are companies that provide estimating in a more packaged form that quickly get to the final number. The one with which I have a working familiarity (Walt Stoeppelwerth  Estimator Books and Software. Home Tech.  www.hometechonline.com) is focused on the construction trades. They have created formulae into which you plug the square feet, height over normal, number of windows and/or doors and economy, medium or fancy outcome. In a few minutes out pops a number which is then multiplied against a regional factor to arrive at a selling price. They keep track of cost differentials through regional surveys which become a factor number that you plug in to give a final price.

Similarly, the auto body industry gets from the manufacturer, books specifying how long it will take for a fender to be straightened or a side panel to be hammered out. From this it is easy to determine what your costs are going to be and to apply a markup factor. Typically, the auto body people use this information to apply standard rates and then encourage their technicians to improve upon those numbers. If they accomplish in 24 hours what the book says will take 32 hours, the price does not change but the costs do, throughput increases and everyone wins.

D.I.Y. estimating

You can Do It Yourself. If the industry you serve has no package to offer you, you can create an estimator package to standardize your costs as follows:

  1. First list all of the steps in the information gathering stage. What types of material, size, finish, and availability? List all the extras. What does your customer expect?
  2. Then list how you currently price jobs focusing on the commonly deployed steps that must be taken. Do you always begin with a site visit? Do the raw materials always have to be sandblasted first?
  3. Apply costs to each step.
  4. Apply your markup factor to get to a selling price.
  5. And now the most important step – the virtual trial run. Review using some previous jobs that worked out well and where you made money. Punch in all those numbers


All these steps would be taken by a software developer and can be incorporated into a spreadsheet programme.

With more tinkering and constant upgrades the above can be made into a comprehensive price list that covers the basics and some of the eventualities.


You will have recognized in the above example that you are looking at a variation on cost plus mark-up, pricing. Estimating software can deliver consistent if unexciting profits because the costs are known unlike WAG and SWAG.

But it leaves money on the table.

Why? Because we have lost sight of the customer in this equation by focusing on costs.

Your customer has called you to solve a problem for them. Do they want flashy but inexpensive countertops because they are putting the house on the market? Do they need new countertops because they cook regularly and have scarred the old surfaces? Are you going to build a price for these two types of customers based on cost structure alone? Just like you, all customers are not equal in expectations or ability to pay. If they were, no one would buy Rolex watches or Mercedes cars.

The answer is to value price for your customer. This is a pricing strategy and by working hand in hand with your costing solutions will be the key to improved profits.

By definition 50% of businesses in your industry are below average. The point in having a solid grasp of costs is to get everyone to the baseline. But to soar above that you need a pricing strategy that focuses on value to the buyer.

The 4 Evils of Margin-Based Pricing Strategy

Margin-based pricing sounds great in theory — it predetermines profit for a specific product by setting a definitive goal for the difference between price and cost.

Unfortunately, the reality is that margin-based pricing creates a host of potential issues for the simple reason that determining price involves many more factors than just cost. Margin-based pricing ignores these other variables, simplifying the process but weakening your results.

To give you an idea of how margin-based pricing can negatively affect your bottom line, we’ve outlined its four biggest evils.

  1. Emphasizes Costs, not Value

Margin-based pricing relies on two major variables—cost and desired markup. It disregards a third variable—the value you create for the customer. This third factor determines what your customer is willing to pay, so margin-based pricing risks one of two undesirable outcomes:

  1. You arrive at a price higher than the value you create for the customer and lose the transaction and any associated profit
  2. You arrive at a price lower than the value you create for the customer and win the transaction, but leave profit on the table

Moreover, margin-based pricing, by ultimately depending on costs, means your prices may change even when the value you deliver the customer does not change or, alternatively, keep your prices flat even when the value you create for the customer changes. Either results can produce a disconnect between your price and the value you create for the customer, ultimately putting your profits at risk.

Take a step back for a moment and consider why your customers chose your company as a vendor in the first place. Most likely, it isn’t because you’re consistently the least expensive option out there (which is a difficult position to maintain anyway). What else are you offering them? Bundle these benefits into a value communication to your customers consistently and often. Weave them into your brand’s message, and make sure customers understand they are included in the price, in addition to the tangible product-based elements of your offering.

  1. Assumes Your Customers Are Clones

Are you treating your customers like the exact same person? You shouldn’t be. When you assume the same price fits all of your customers through margin-based price management, you create three major pricing potential issues for your company:

  1. Tailored Value Propositions are impossible to create, creating a crater-sized hole in your pricing strategy.
  2. You sacrifice increased margins from customers willing to pay more due to incremental value you create for them.
  3. You run the risk of losing customers who draw the line at a specific price point.

A more profitable pricing strategy takes these scenarios into account and plans for each of them. For example, when you outline value proposition to your customers across their various buying situations, you understand that one size doesn’t fit all. Your customers exist in different markets, seek different products, and find different things appealing in different situations. Do a little research to determine what matters most to specific customers, and use this data analysis to properly segment them into groups (“pricing segments”), each with their own designated pricing strategy.

Also consider segmenting your customers into groups defined by price responsiveness. We all have customers who don’t balk at incremental price increases either out of loyalty or an accommodating budget. And we all have those customers who pinch pennies and demand answers at every tiny price increase. This is not taking advantage of the customer – it’s a practicing a subtle yet powerful form of value-based pricing.

Instead of having pricing for all customers ebb and flow with input costs, set a profitable price for each customer segment and then do your best to hold it there. Most customers will appreciate the consistency, and your team will most likely save on the resources and time that accompany negotiation around constantly-changing prices. Of course, if there are massive changes in input costs, customers will likely be aware of this and you should temper your approach in these situations accordingly.

  1. Assumes Your Products Are Clones

Margin-based pricing also has the evil tendency to lump all of your products together as it does with your customers. Many companies employing this strategy set a margin goal for huge groups or — gasp — every single one of their products.

For example, if your company carries a standard 5 pound bucket as well as a non-standard 4 pound bucket, it wouldn’t make sense for you to charge the same price for those products, even if the costs for them might basically be the same. A non-standard product in inventory immediately gives it a higher value than other similar products, and you should be passing on this premium to your customers in the form of a higher price. After all, the 4 pound bucket has a slower product velocity, and you’re creating value for your customers by keeping it on your shelves.

For effective product segmentation, start with taking stock of all of your products and their implied value to your customers. Then segment these into smaller groups and price them accordingly. To enhance your price performance for even better profits, build upon this and a customer segmentation strategy to determine effective pricing for specific products within distinctive customer groups. This can get complicated quickly, so having an intuitive and effective business analytics solution to help you juggle, organize, and properly analyze all of your data is key.

  1. Relies on Volume for Profit Improvement

The last evil on our list is narrowing focus on growth to volume alone.Businesses have five levers to improve profitability: price, cost, customer mix, product mix, and volume. Margin based pricing takes the first four out of play completely. Prices are dictated based on a set margin percent, and costs gains are immediately passed through to customers, eliminating those levers. Margins for all customers and products are set to a single rate, so you have no ability to improve customer or product mix. This leaves you with volume as the only lever to improve profitability. Why would you want to adopt a strategy that limits you to only one lever to improve performance when you could have five levers?

Moreover, businesses that focus heavily on volume to drive growth usually end up having to cut prices to reach their goal. This, in turn, often triggers price wars and put companies on a downward spiral that’s difficult to stop. By focusing solely on volume, your company relinquishes control over your profits.

Change direction by using all five profit levers — price, cost, customer mix shift, product mix shift, and volume — in tandem to find the quickest and most sustainable path to profit.

Brilliant oroginal by : Chris Sorrow June 2, 2015

A growing number of companies are using “dynamic” pricing

Schumpeter: Flexible figures.  as printed in The Economist Jan 30, 2016



A growing number of companies are using “dynamic” pricing

IF A cynic is someone who knows the price of everything and the value of nothing, as Lord Darlington observes in Oscar Wilde’s “Lady Windermere’s Fan”, then it is getting progressively harder to be a cynic. A growing number of companies keep their prices in a constant state of flux—moving them up or down in response to an ever-shifting multitude of variables.

Businesses have always offered different prices to different groups of customers. They offer “matinée specials” for afternoon cinema-goers or “happy hours” for early-evening drinkers. They offer steep discounts to students or pensioners. Some put the same product into more than one type of packaging, each marketed to a different income group.

Dynamic pricing takes all this to a new level—changing prices by the minute and sometimes tailoring them to whatever is known about the income, location and spending history of individual buyers. The practice goes back to the early 1980s when American Airlines began to vary the price of tickets to fight competition from discounters such as People’s Express. It spread to other airlines, and thence to hotels, railways and car-rental firms. But it only became the rage with the arrival of e-commerce.

The price of goods and services sold online can be varied constantly and effortlessly, in accordance with the numbers and characteristics of those making purchases, and factors such as the weather. Competitors can be monitored constantly, and their prices matched. Amazon updates its price list every ten minutes on average, based on data it is constantly collecting, according to Econsultancy, a research and consulting firm.

The practice is spreading to physical retailers, which are installing electronic price displays and borrowing pricing models from e-retailers. Kohl’s, with nearly 1,200 stores in America, now holds sales that last for hours rather than days, pinpointing the brief periods when discounts are most needed. Cintra, a Spanish infrastructure firm, has opened several toll roads in Texas that change prices every five minutes, to try to keep traffic moving at more than 50mph (80kph). Sports teams, concert organisers and even zookeepers have embraced dynamic pricing to exploit demand for hot tickets and stimulate appetite for unwanted ones.

The dynamic-pricing revolution provides plenty of benefits for businesses. Besides helping them smooth demand (which can spare them the cost of maintaining extra capacity for peak times), it makes it easier for them to squeeze more out of richer customers. Travel websites have experimented with steering users of Apple computers—assumed to be better-off than Windows PC users—towards more expensive options. Airlines have been caught charging loyal travellers more for a ticket than infrequent travellers, on the assumption that they are more likely to be on a work trip, so their employer will probably be paying. The technology is far from perfect: ever since buying a coffee machine online your columnist (who is not good at newfangled tasks such as clearing browser cookies) has been inundated with offers for coffee machines, as if the purchase was proof not of a need that had been satisfied but of an insatiable desire.

Even if the technology becomes more sophisticated, there are two risks for businesses with dynamic pricing. The first is psychological resistance: companies’ reputations can suffer if they offend customers’ sense of fairness. Uber encountered a backlash when it increased its prices eightfold during storms in New York in 2013. Such “surge” pricing makes perfect economic sense: drivers are more likely to go out in hostile conditions if they get paid more; and many customers would prefer a high-priced ride to no ride at all. But these arguments cut little ice when prices run counter to people’s sense of equity. So, in this week’s snowstorms in New York, Uber capped its surge prices for its regular taxis at just 3.5 times the normal fare.

Psychological resistance can be fierce when companies use data collected from their customers to charge them more. That is why, in 2000, Amazon quickly dropped a scheme to charge some customers more for DVDs based on their personal profiles, and why it has trodden carefully since. Customers are learning to play the game. Some are searching for flights from an internet café instead of their living-rooms, to get lower fares. Others are piling goods into their online baskets and then failing to click “buy”, hoping this will prompt the seller to offer a better deal.


The second risk with dynamic pricing is that it ends in a race to the bottom. Companies that sell online have long been caught up in a war for the top slot on price-comparison sites: even being cheaper by a penny can make all the difference. Physical retailers are being caught in the same logic: those adopting dynamic pricing are mostly doing so to avoid being turned into mere showrooms by customers who inspect the goods but then buy online. The Nebraska Furniture Mart constantly watches what competitors such as Amazon and Best Buy are charging, and updates its in-store electronic displays each morning to meet its guarantee of offering the lowest price. This is obviously good for customers. But getting fixated on prices can distract businesses from seeking ways to make their products and services so attractive that customers will be less fussy about their cost, as the most successful purveyors of luxury items, from Ferraris to Hermès scarves, do.

The oldest form of dynamic pricing was practised in ancient bazaars, where merchants would size up their customers before the haggling began. Those retailers might not have been able to compute as many different variables as today’s algorithms. But they still have something to teach today’s dynamic pricers about the importance of establishing trust and playing on desire. Cynical as it sounds, to understand a customer’s underlying willingness to part with their money you need to pay a good deal of attention to values.


CHASING DUCKSWhen businessmen tell me that being low priced is the only way to stay in business, I am sceptical. Price is the simplest way for a consumer to compare and is overused as the basis for a decision to buy. Price noise is the screaming toddler in the room- demanding excessive attention relative to importance. And most businessmen pay excessive attention.

In the July 2015 edition of the Business Examiner, the owners of Command Industries admit their shock after quizzing their customers. A mentor had suggested that they speak directly with their top customers and ask them, why do you buy from Command? “I was sure the answers were going to be pricing related and focused on comparing costs with our competitors. “said Rob Woudwijk. “But the results of those conversations shocked me. It was never about the money. Instead they talked about the way we communicated with them, the level of transparency and honesty we have as a company and our problem solving mentality”.

Would price have figured in the equation at any time? Of course, but it looks like price was further down the list than they believed. In a study reported by Right Technologies by Bob Thompson called the Loyalty Connection, price features lowest as the reason that customers stop dealing with a company. In his analysis, customers leave almost 75% of the time due to customer service problems while owners see that as being important in only 22% of the cases. Quality is seen by customers as an issue fully 32% of the time while owners rank quality as the suspect only 18% of the time. It appears that staff indifference is a greater cause of losing customers than doing a bad job.

Similarly, price was ranked by owners as the number one issue at 45% of the time while customers felt price was important only 25% of the time.

And what about employees? Do they value their pay cheque more than a great boss or satisfying work?

Does Money Really Affect Motivation? A Review of the Research

In “Does Money Really Affect Motivation? A Review of the Research” by T. Chamorro-Premuzic published in the Harvard Business Review, the authors reviewed 120 years of research to synthesize the findings from 92 quantitative studies. The combined dataset included over 15,000 individuals and 115 correlation coefficients. In the study there is a weak, almost negligible correlation between pay and happiness and so they conclude that money is a weak motivator.


So, where does this leave the average business owner? To focus exclusively on price differentiators is evidently NOT the answer. My dog swims with determination after ducks, but she never catches one. Being cheapest in the market place leads in only one direction – the dumbest competitor will win. And after the ducks have flown, those left standing.. er, swimming.. will have the best employees, happiest bankers, most motivated bosses and HIGHER prices. Where do you want to be?

The Price of Money – a Lender Perspective.

Bag-of-MoneyMoney is not a commodity. By definition, a commodity is a generic product that is bought and sold on price alone. Money, Canadian bills for example, look the same, smell somewhat the same, and are available country wide. But, when you want to borrow money, rent the money in fact, the price for that money is not at all consistent.

Why does the price of money fluctuate from person to person? Why do some people borrow at prime minus rates and some at 18%? It is because, in part, that your lender does a risk assessment of you and your circumstances that affects what they will charge. Let’s look at this from the point of view of a mortgage for your home.

The first consideration is location. If your home is 100 kilometres from the nearest small town of  4000 people, you might not get a mortgage at all, but if you do, the lender will add risk factors. If you default, will anybody buy the property and redeem the mortgage? Your Shangri-La is perhaps too unique to attract a buyer.

Then there is the home price bracket to consider. A home priced to sell in a hot price bracket is easier to mortgage than a million dollar home. There are simply more buyers who equate to an easier exit from the loan in the event of default.

Then there is the loan to value calculation. A high ratio means only that you do not have enough “skin” in the game and if things get overwhelming it is too easy for you to walk away, leaving the lender with your house. A higher loan to value ratio simply means you will pay a higher interest rate or have to give up your first born child.

Then there is your employment. Self-employed or just started a new job? You will pay more for your money. That is because the risk of not being employed or having too little money coming in to service the mortgage is higher than having a nice steady government job.

Then there is your credit report. Credit is something to be managed. Keeping your record clean and current shows that you are fastidious about paying your obligations. Having a low score means you are a deadbeat.

All of the above explains why some people pay 2.5% and some 15% on their mortgages. It is, in part, a reflection of the supply and demand function.


SQUARING THE CIRCLE: Consumer Choice and Consumer Segments

square peg

I have been reading about market segmentation and choice. Howard Moskowitz’s research into tomato sauce as retold by Malcom Gladwell on the TED talks led to a big increase in sales by Prego.The company added new varieties to its lineup of sauces – chunky, garlicky, mushroom, and saw a big jump in sales.(http://www.ted.com/talks/malcolm_gladwell_on_spaghetti_sauce?language=en  Moskowitz’s conclusion was that consumers are not one great monolithic entity with one taste in tomato sauce. Therefore, the company needed to offer more varieties and in so doing dug deep into the market.

But merely offering lots of choice leads to lower sales. In Terry O’Reilly’s CBC Radio programme, Under the Influence, (http://www.cbc.ca/radio/undertheinfluence/limited-edition-brands-1.3021076) Terry recounted a test marketing of jam. When consumers were offered dozens of varieties and even inducements, like coupons, sales were still less than where consumers were offered limited choice. It seems that our human brain cannot cope with too much choice. Too much choice causes us to walk away shaking our heads.

How can we square the circle of too much choice simultaneously increasing sales and killing sales?

The companies that have been successful in adding choice already have a market presence. Reebok introduced its soft leather dance shoe in 1982, but gradually offered tennis shoes, basketball and then children’s shoes. There was a time lag as Reebok built its brand and consumer awareness of the benefits of supple leather footwear. Introduced all at once to the market, it could have been hard to sell a monolithic idea to a splintered group of people with altogether different needs and tastes. We are not all the same and so we all do not need the same product.

So how is it done? First create a presence in the market for 1 product or service that is the best or suits your target market the best. Dominate your market. Like the pub in the sitcom, Cheers, Everyone Knows Your Name. This is brand creation. Offer limited choice in that product or service. If you are offering more than 3 or 4 choices, trim. Only when you have some significant market share (you are measuring your market penetration, right?) can you start slowly adding other related versions to the original idea. Even after marketing leather shoes to dancers, Reebok is still best known for…  running shoes.

One Studied Tactic to Negotiate a Better Price

deal1One Studied Tactic to Negotiate a Better Price: How you frame your initial offer affects how high a buyer is willing to go.

Whether you’re negotiating the price of a big client order or selling your company, is it better to offer a single initial figure or a range? According to a recent study, the latter is the better option.

Researchers from Columbia Business School ran a series of five negotiation-simulation experiments involving Amazon’s Mechanical Turk workers and business school students. Participants were asked to not only guess what their partner’s reservation price (the lowest price they would accept), but were also asked questions designed to show how they perceived their partner—the study’s authors were curious as to whether certain negotiation tactics might lead to a likability cost, even if they resulted in a few more dollars for the partner.

In the paper, which was published in the Journal of Personality and Social Psychology, the researchers said that those who asked for a range were more likely to get their reservation price than negotiators who gave a single offer. There was also little evidence that a range offer would cause the negotiator to be seen in worse light.

In other words, open with a price of $7,000 for your car, and you’ll get counter-offered $6,500. But open the bidding with a range of $7,000 to $7,500, and the bidding starts at $7,000.

So the next time you’re posed with the salary expectation question, looking to sell your business, or trying to get a profitable price for your product, remember to always give people a range—you’ll reap the benefits in the end.

reprinted from Profit Report – Kristene Quan and David Fielding || April 15, 2015

Gartner Survey on Pricing Strategies Used by Retailers

snakes and laddersPrice is a critical competitive issue for retailers.  (That is, of course, an understatement). A recent survey by a Gartner Company subsidiary and point of sale research firm, Software Advice, examined how retail technology adoption, especially pricing strategy,can help a retailer stay afloat in today’s make-or-break market. The report confirmed that retailers face a number of important decisions when determining how to price their goods and services. Setting prices correctly, after all, can attract customers, drive sales, burnish a retailer’s reputation, and, affect the retailer’s very existence. Incorrectly-set prices, on the other hand, can have a profoundly negative impact on sales and customer loyalty. To help make more informed decisions, retailers must rely on the use of various pricing strategies and competitive price monitoring and analysis.  See the full report at www.softwareadvice.com/retail/industryview/pricing-strategies-report-2015.

The Most Effective Pricing Strategies, Defined

Eight different pricing strategies rated as most effective by the retailers were Discount; Bundle; Below competition; MSRP; Odd pricing; Price lining; Dynamic; and High-low.

The survey found that a majority of respondents (51 percent) use software to manage product pricing; 39 percent of them using a stand-alone pricing application. Discount, below competition and bundle were the most effective pricing strategies for the department, specialty, grocery and e-commerce sectors, but discounting took the lion’s share of pricing strategy in every category.

Most Effective Pricing Strategies:

Most interesting to us were the comments from the retailers on various strategies they use to increase sales and diminish inventory:

*One retailer said his company used bundling, discount, price lining and odd pricing in for its online store. “We use different strategies because our customers are not just one solid segment of people in the market,” he explained. Millennials, baby boomers, bargain hunters and office managers are all groups targeted. “We use the different pricing strategies and then run them through a market analysis weekly,” he said.

An example he gave: If the product is ink for a particular printer, the target market would consist of customers who purchased that printer in the past, which might include college students, accounting offices or small businesses. Depending on which customers purchased the printer, different pricing strategies are used to attract them.

“Bundling, he said, conveys a sense of value through the savings the customer receives on each item by buying in bulk.” (For example, selling water bottles for $19.75 each, dropping the price to $18.76 per bottle when three or more are purchased.

The retailer noted that while the discount strategy attracts aggressive bargain hunters to his business, it’s not the most effective strategy on a per customer basis, but it’s still significant enough to his overall business to warrant its continued use.

*The CEO and founder of a group of fashion retail stores said his stores use different pricing strategies to meet different goals. One such strategy, with the goal of selling more units, is incremental discounts that increase with the number of items purchased (for example, getting 20 percent off the second item purchased and 30 percent off the third). The company also uses specific promotions to drive sales of items for which the store has large amounts in stock.

Because this retailer has high-end stores with name products, the concept of odd pricing, which implies bargain pricing—is not the perception he wants to create of his merchandise.

*Everyday low prices, another common grocery price strategy used by stores like Walmart and Target (and which undid Ron Johnson at JC Penney) was included in the survey but is not among the strategies rated most effective by respondents because not everyone has the buying and pricing power of the giants.

*A Canadian retailer reported that he uses MSRP in his online shop which sells vaporizers and related accessories. The MSRP, he said, allows him to maintain good relationships with manufacturers, but can be hard to maintain when the same products he sells show up at Amazon or eBay at lower prices. To avoid price wars, maintain good terms with manufacturers and maintain its own margins, he developed a line of house brand accessories to pair with the core products sold at MSRP.

Bottom Line:

When it comes to pricing technology, the most sophisticated, forward-looking global retail intelligence leaders offer SaaS-based intelligence and analytics solutions that transform the way retailers price, select merchandise, and manage products in order to maximize sales and optimize margins.

For example, the Upstream Commerce Suite of Solutions empowers retailers to base all shopper-centric decisions on real-time market data. The Company’s highly configurable, flexible, and user-friendly platform enables retailers to effectively manage their pricing strategy through accurately tracking and comparing product pricing, availability and promotions using price intelligence; pricing dynamically; optimizing product selection; monitoring MAP; making relationships with suppliers better informed, and price predictively for optimal sales and profit.

with thanks to Naomi K. Shapiro



What every business person wants to know: How to Tell if Your Marketing is Working

white board

If you’re not getting results after 4 months, it’s time to ask some serious questions—including whether the problem falls with you

Because marketing is not something with which many B2B companies—especially manufacturers and technical firms—are overly familiar, many leaders of these businesses have a lot of questions about how it all works. The first question most CEOs ask when they launch a marketing effort is, naturally, “How long does it take to get results?” But a close second is this: “How do we know if we’re marketing the right way?”

(This question is sometimes phrased more bluntly: ‘How will I know if it’s time to fire my marketer?”)

As I’ve outlined before, marketing does take time to show results, so impatience can seriously threaten to success. But at the same time, you shouldn’t have to wait six months to know whether your efforts are making any progress.

And as I’ve also written before, the first 100 days are the most crucial for setting your marketing efforts on the right path. That’s when your marketing team should be creating a strategy, defining your target market and value proposition and creating collateral to help the sales team to sell with confidence. A new website could fall in there too, depending on complexity of the job. If your marketer can accomplish all these tasks in the first four months of working with you, it’s safe to deduce that your firm on the right track.

But it’s important to note that if a marketer hasn’t accomplished those things, it doesn’t necessarily mean they’re failing—especially if your company has never done any real marketing before. As long as you see that progress is being made on coming to decisions and building the marketing foundation (that is, your messaging, website and collateral), you can probably stay the course.

But if after four months you have seen no tangible results at all from your marketer—no signs of a new strategy, no road map to new collateral, no talk of a new online presence—consider it a red flag. An inability to get anything accomplished in the early days is a harbinger for more of the same in the future. Either your marketer is incompetent (what many leaders tend to think), or your company is unable to make decisions. I’ve seen both. And while many CEOs like to think that their companies are perfect, if you’ve had a string of marketers who haven’t been able to achieve results, you need to consider the possibility that the problem lies with you.

With thanks to Profit Magazine; Lisa Shepherd || November 14, 2014

Lisa Shepherd is author of Market Smart: How to Gain Customers and Increase Profits with B2B Marketing and president of The Mezzanine Group, a business-to-business strategy and marketing company based in Toronto. She was the youngest female CEO of a company on PROFIT’s ranking of Canada’s Fastest-Growing Companies in 2007 and 2008 and is a frequent public speaker on B2B marketing strategy and execution.