Pricing: What a moment of truth!

Referring back to What You Do and What You Deliver, when was the last time you took a good hard look at pricing for your product or service?

Pricing is a crucial and often ignored aspect of optimizing returns on marketing efforts. Let us not forget, though, that it's money we take to the bank... Not brand equity. Not cool online interactivity. Not awards for slick ads. At the end of the day, it's all about aggregating myriad consumer decisions that this or that particular product or service provides value at or above the price being asked.

You'll note, I'm not talking margin on top of cost here. To me, product cost is a variable to be managed to hit the price consumers will pay for what's on offer. Cost-plus pricing is risky pricing. It may deliver nice looking margin percentages, but can lead to asking prices that severely undermine effectiveness in-market.

So, when exactly was the last serious consideration of price for your product or service? Is it too high? Too low? Is it competitive with other similar services on offer? Is it a delight for consumers of your product because you're delivering killer value? Is it leaving enough room for resellers to make a profit and still keep the end-price to consumers compelling?

There are many, many variables to pricing, and managing pricing well involves as much diplomacy as it does financial savvy. Often, pricing discussions arouse emotional responses or knee-jerk reactions from executives, retailers, and consumers themselves. It's crucial, however, to raise the topic with appropriate frequency. Why, you ask? Imagine waking up one morning to discover your competitor has undermined your price, or to learn that retailers are removing your products from shelves because they can't make enough margin to be profitable and still meet the needs of their customers.

Managed well, however, pricing can be a serious strategic weapon, delighting customers and consumers while delivering profits for your business. It's a tough task, because leaving money on the table can starve a business just as overpricing can expose it to competitive market share incursions. Take the time, though. It's worth it!