I spent my Saturday studying up on some pricing ideas for the “Set the Right F*$%& Price” course that I’m working on.
I’ve found a platform and I’ll roll it out with a mix of video, homework, and case studies in the next few weeks.
As I was working through it, I came up with a few ideas I think I should share with y’all this morning.
Pricing demands research: You can do a Van Westendorp survey, conjoint analysis, monadic surveys, or something else, but you need to do research to set prices effectively.
Data can be dangerous: The data and business analytics crowd are always telling you that you just need to massage the data to answer any question. When it comes to any marketing challenge, the data can be dangerous. You have to be constantly in the market to understand what data matters and what data doesn’t.
Segmentation and noise in the market makes pricing more difficult: Segmentation has become more difficult for a lot of businesses. This has made pricing more difficult as well. As we get more noise, standing out is difficult. When you can’t stand out, you can’t always get the price you deserve.
Less than 10% of businesses are systematic about pricing: Most folks are making it up. Full stop.
Of the four levers of profit, pricing is the king: Oh allow me to show you some numbers:
If you cut fixed costs 1%, you can grow your profits at most 2.5%.
If you boost sales, you can grow your profits by around 3%.
Cut your variable costs, you do better and grow profits maybe 6.5%.
But raise your prices 1%, you grow your profits between 10-11%.
That last number is consistent across research.
I’m spending a lot of time on pricing lately. And, I’m doing it because I hear all of the arguments about inflation, wage increases, and price integrity. Also, “Discounts are for Dummies.”
Maybe the world is catching up with me!?