Can you be confident you have the right pricing model?
Mark Peacock
Helping B2B Tech, IT & Digital firms increase margins & revenue growth with tailored pricing services. ** Top 100 Global Pricing Leader **
Here are two stats that might make you rethink your approach:
?? 85% ???? ???????????? ???????? ?????????? ?????????? ?????????????? ?????????? ?????????? ?????????????????????? ?????????????????????? (Bain & Co).
?? ?? 1% ?????????? ???????????????? ?????? ?????????? ?????????????? ???? 8-10% (McKinsey).
Put those together, and you’ve got a massive, untapped opportunity for profit growth. Yet most businesses stick with pricing strategies based more on fear than facts.
Take discounting, for example. Many businesses accept that offering discounts is “just the way things are.” But poorly managed discounts are one of the biggest causes of margin erosion.
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What would happen if you halved all of your discounts: so 10% becomes 5%, 20% becomes 10%, and so on?
?????? ??????????????????:
??Customers will push back.
?? Sales teams will hate it
??Competitors will take advantage
??It feels risky and you don’t want to rock the boat.
???????????? ?????????????? (???????? ?? ???????????? ????????):
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??New customers won’t notice the smaller discounts.
??Sales teams can be trained to use discounts correctly
??A small number of customers might complain, but the majority won’t.
??Net selling prices improve by 3-5%, with the upside all going straight to your bottom line.
There are hundreds, maybe thousands of ways that your pricing model can be tweaked or improved, yet most people stick with the same industry-wide approach that everyone else uses.
Businesses that take the time to carefully consider their pricing model and are willing to try new approaches will almost always become more profitable as a result.
And FOMU (fear of messing up) can be managed to ensure key risks are identified and a plan put in place to mitigate them.
So, what’s more important to you?
??. ?????????????? ????????????: Chasing top-line growth at all costs, even if it means weak pricing, dodgy discounts and thin margins.
??. ???????????? ????????????: Prioritising sustainable margins, even if it means losing a few price-sensitive customers along the way.
Smarter pricing isn’t as scary as you think—and the upside is huge.
Are you optimising for revenue or profit growth?
Let me know if you want to talk this through.
AI Founder & CEO @ FutureUP | Building the Future of Price Optimization | Top 50 Thought Leader in AI | Raised $9m in VC funding in AI
1 个月Could not agree more, Mark! Pricing is the biggest profit booster compared to cost reduction and sales increase, but most companies, even big ones, don't focus enough on it. ?? Sometimes, it is out of ignorance. Also, companies could be overwhelmed by the complexity of their pricing challenges and do nothing to avoid the hassle. But this is wrong, and they are missing a lot. For instance, there are a lot of quick wins that can be applied easily. In the example with the discounts you mentioned, Mark, we usually tend to use round discount steps from 5% to 10%. But why not use 1% steps instead? So when the customer asks for a discount, we start at 1 or 2%, not 5%. Or price rounding - e.g., decreasing the price from 10 to 9.99 can yield significant returns in B2C and sometimes this also works in B2B markets. And one more thing about the "rivalry" between revenue vs profit growth. Why not combine them in what we refer to as profitable growth, e.g., change our price to maximize growth with a min of x% profitability? Again, thanks for sharing, Mark!