Unlock Your Business Potential with Pricing Power: Insights from "Double Your Price" by David Falzani
Setting the right price can make or break your business, yet so many companies consistently undervalue their products and services. In his book Double Your Price which won Sales and Marketing Book of the Year 2024 award, Professor David Falzani dives into one of the most overlooked aspects of business strategy: pricing. Here’s why the right pricing strategy can be your greatest growth lever.
The Danger of Underpricing
One of the biggest mistakes companies make, especially startups and small businesses, is underpricing. Falzani highlights that many businesses undervalue their offerings due to a lack of confidence in their value proposition. The fear of losing customers can drive businesses to price too low, but this often results in diminished profit margins that stunt long-term growth.
Pricing as a Profit Lever
Research cited in Double Your Price reveals that a mere 1% increase in price can lead to an 11% improvement in operating profit. That’s nearly four times the impact of increasing sales volume by the same amount. Pricing power is a potent driver of profitability, yet many businesses continue to rely on outdated cost-plus models that focus more on covering costs than maximizing value.
Overcoming the Fear of Price Increases
Falzani suggests businesses experiment with pricing, particularly by testing price hikes in new markets or with new products. Companies are often surprised to find customers willing to pay more for premium offerings. He also emphasizes the need for regular price reviews, rather than the outdated “set it and forget it” approach many companies use. Pricing should be viewed as a continuous strategic lever, rather than a risky one-off decision.
David's book was published before the uproar over dynamic pricing of Oasis tickets but I see that as confirming David's ideas. That pricing is a strategic issue whether you see dynamic pricing as a means to extract more economic value and a fairer way to distribute scarce tickets, or whether you should just have a fixed price the way the Cure have said they will do. DM me if you want to know if I am Team Cure or Oasis when it comes to their music.
Value Perception vs. Price Reality
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Pricing is not just about covering costs—it’s about perceived value. Falzani highlights examples like bottled water, where the same product (H2O) can command a 600% price variation based on branding and packaging alone. Customers often associate higher prices with better quality or a more desirable experience. Understanding this human tendency can allow businesses to create pricing strategies that align with customer perceptions.
Managing Internal Resistance to Price Changes
Sales teams and managers often resist price increases due to fears of losing customers. However, Falzani argues that businesses should not shy away from setting higher prices if their product delivers superior value. Linking sales incentives to profitability, rather than just volume, can shift internal mindsets toward valuing price as a growth driver rather than a barrier to closing deals.
By implementing these insights from Double Your Price, companies can tap into the true potential of their pricing strategy. Price isn't just a number—it's a powerful statement of value. And in a world where competition is fierce, leveraging price strategically can set your business apart.
What’s your take on pricing? How does your company approach setting prices?
#PricingStrategy #BusinessGrowth #ValueProposition
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Full interview with David Falazani is here