| Issue 73 |

Strategic Pricing – How to Match Pricing to Strategy

The first part of an article that was published in the 244 edition of Status – The Management Perspective Magazine

Is pricing a tactical or strategic issue? Who should dictate the pricing of your products and services? How do you know what the right pricing is for your business and marketing strategy? What pricing will let you to grow and increase your revenues in your market? This article will attempt to answer these questions, while focusing on the strategic aspects, and on matching the pricing to your strategy.

?Pricing – Tactic or Strategy

Pricing has tactical aspects, especially if it is specific pricing, such as negotiations with a large customer, a price quote as part of a tender for service provision, or a sales promotion of a shelf product. There are tactical pricing principles that you should employ in these cases.

For example, prior to negotiations with a large customer, you should determine in advance the lowest price (based on the minimal cost and profit that will suit us), the highest price (based on market prices, above which the customer will refuse to buy), and an intermediate price that we can aspire to (based on the profit and the positioning we wish to attain – as a company providing either cheap, intermediate, or expensive solutions). During the actual negotiations, you should start with the highest price, which is above our target price in any case, and if necessary – lower the price in increasingly smaller increments, to indicate to the customer that we are reaching our lowest possible price.

There are also similar tactical principles for pricing quotes as part of tenders, and to pricing sales promotions. For example – with certain tenders, it is recommended to offer the customer a range of discounts according to future purchase volumes. Details about successful pricing for Gilat’s antennas using this method appear on page 53 of the book Ekdah Bekrav Sakinim (Gun in a Knife Fight) by Yoel Gat. With certain sales promotions, it is standard practice to raise prices one month before the sale. For example – raising the price of books one month before the annual Book Week sales.

Strategic pricing is a key to competitiveness

So, there are tactical aspects to pricing, and tactical principles for specific pricing. However, on a macro-scale, pricing also has a decisive strategic effect. Pricing is one of the 4P’s of the marketing mix (product, price, position, promotion), and it is therefore a cornerstone of the marketing strategy. Pricing indicates to customers our positioning in the market in relation to the competitors (for example – basic, premium, super premium). The pricing we choose must match our business strategy (in other words – our market, and what products / services we will offer). For example – a company that offers subcontracting services must offer competitive prices to its customers, who will undoubtedly compare with other suppliers.

Later in the article, we will focus on the question of how to match pricing to strategy. In other words, according to what strategic principles must we price all the company’s products and services. This is an important question. The CEO and the Marketing Manager are meant to have their say, to answer this question, and to dictate to the entire organization the strategic principles for appropriate pricing.

For the rest of the article – click here .

• For additional articles : click here
• For strategic advice on pricing: contact us

   

Ideas for innovations in computer mice

 
The following ideas were developed using various thinking tools, and do not exist at present (to the best of our knowledge):

1. A mouse that vacuums the dust from the desk and keyboard
2. A optic mouse with a built-in GPS, that also works on a smooth white surface
3. A kinetic wireless mouse that automatically recharges when you move it
4. A mouse that doubles as a thermometer (when you hold it in your hand)
5. A mouse with a vibrate mechanism, that massages our hand while we work, and prevents wrist pain
6. A mouse with a built-in nail clipper
7.   A mouse with a built-in extendable utility knife that can be used to cut paper and cardboard
8. A trolley that has a built in GPS that can link up with a phone app to show its location (makes it possible to locate, and also prevents theft)
9. Two mice that connect to one computer (for two-player games)
10.   A mouse with an odometer that shows how hard our (mouse) hand has been working (and maybe even suggests taking breaks)
11. A telescopic or inflatable mouse that can be made larger or smaller according to the size of our hand
12. A mouse with a pre-defined signature as a security measure (the computer only starts working once we sign our signature with the mouse).
13. A mouse that exclusively turns our computer on, which we carry in our pocket when we are away from the computer

• Articles on Systematic Innovation 
• For information about Systematic Innovation workshops: click here
• We would be happy to read your comments and suggestions