1Value and segments
Who really pays, and for what.
Pricing
Price is the fastest lever on profit and the one managed least often. We build a pricing model and discount rules tied to the value for the customer and to your margin.
Sound familiar?Competitors and habit set the price, Discounts cover up a weak offer, Margins by segment and product are unknown
Marketing and Advertising
How we work
1
2Cost and margin
By product and segment, including the cost to serve.
3A pricing model
Tiers, packages and discount rules with limits stated in numbers.
4Testing and rollout
Testing the new price on some customers and training the salespeople.
Sound familiar?
- Competitors and habit set the price.
- Discounts cover up a weak offer.
- Margins by segment and product are unknown.
What usually lies behind it
When the market sets the price, margin becomes whatever is left over rather than a decision. Discounts are given without calculating how much extra volume they require. For example, at a 30% margin a 10% discount requires about 50% more volume just to keep profit from falling. The sales team rarely knows that number.
What you get
A pricing model with a logic for its tiers.
Discount rules: who, up to what limit and under what conditions.
A calculation of the effect on profit under different volume scenarios.
A plan for testing the changes.
The cost of waiting
If nothing changes
- 01
Growing volume may reduce profit.
- 02
Salespeople will sell the discount instead of the value.
- 03
Any price change will remain a conflict.
When you don't need this service
- Costs are unknown or can't be trusted. Records and profitability analysis come first.
- The offer has no differentiation. A price won't create it; positioning comes first.
How to tell it worked
Actual margin
whether it matches the planned margin on closed deals.
Discount discipline
the share of deals with a discount above the set limit.
Knowing the economics
whether a salesperson can say what a discount costs.
Questions
Will we lose customers if we raise prices?
Some, possibly. The question is which ones and how many, and whether profit went up as a result. That's calculated before the change and tested on a portion of customers.
Should we look at competitors' prices?
Yes, as a reference point. Otherwise your margin is set by other people's decisions.
Can we get rid of discounts altogether?
Usually not. They need to become a rule with a limit.
Related
Services: Profitability Analysis · Business Positioning · Sales Management Materials: Unit economics for owners: seven numbers · Marketing stopped working: five real reasons
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