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Strategic pricing is the marriage of strategic marketing and finance. Marketing brings the customer sensitivity, and finance brings the economic rigor. In our experience this combination can add as much as 9% revenue growth with few associated costs. In other words, revenues from pricing improvements are highly profitable revenues that you can drop to the bottom line or use for strategic investments.
Nowhere is this connection between strategic marketing and finance more evident than in the marriage of offering design and pricing strategy. Good offering design is the foundation of value based pricing strategy. On the marketing side, design is based on an understanding of customer’s value drivers, how those value drivers differ across market segments, and packaged in such a way that they are consumable. On the finance side, good offering design is cost effective to deliver. A solid product price strategy balances those two to create profitable revenue growth.
The connection between offering design and pricing is so close, we coined the term Price-Offer Design to describe it. It is hard to see where one leaves off and the other begins. If you serve two market segments with different needs— one valuing speedy service, and the other wanting hands-on help— you will need to design your offers to accommodate them. By adjusting your service to meet their needs, the value of your service increases. Pricing, in essence, is the capture of a share of the value you create. In this case you might have a core offering and two value add options, one for customers desiring speedy service and the other for those wanting hands-on-help. Each of these may be priced independently. In this case your Price-Offer Design has created opportunities for customers to invest more with you because your prices are aligned with value delivered.
Remember, pricing strategy is about more than creating profit or creating growth; it’s about creating profitable growth. By investing your time to create a comprehensive pricing strategy, you’ll benefit from stronger offerings and value propositions, less discounting, less price competition, higher sales productivity, and much more.