Price it Right. Price it for Growth
As companies go through their growth journey, a key area that needs proper attention is Pricing. Just like any other financial element, Pricing also is very time bound and needs a proper strategy aligned to it. How a company prices today need not necessarily reflect on how it will be pricing in future or how it has priced in the past. And in many cases, within a year there could be multiple pricing models that could come into play.
As a general practice, companies endeavor to have a constant and consistent pricing so that there is transparency in the eyes of the customer and also is easier to track their effectiveness. Having said that, this might not be applicable to all kinds of products or companies. While a constant and consistent pricing is important, its also important to continuously tweak the pricing models to see their effectiveness.
There are in-general 6 different types of pricing models.
1. Premium Pricing
2. Market Acquisition Pricing
3. Economy Pricing
4. Predatory Pricing
5. Geo Pricing
6. Value Pricing
Each pricing model can be used in isolation or together. While the external pricing could vary across these 6 models, the internal pricing (or what we call as Benchmark pricing) should always be baselined. Only when we baseline the internal price will we be able to effectively measure the effectiveness of each of the above pricing models. Each Model above can be looked as a separate pricing model or as a factor of discounting to the baseline price.
A strong performance foundation platform is needed to study the impact of different pricing models. Each of the Pricing models above need a mix of both Financial and Operational data to measure their effectiveness
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