Understand the different definitions of price to better defend it.
Pricing is one of the most contentious issues in a company's commercial approach. This is hardly surprising: optimizing the pricing of a product is often a difficult operation.
During the launch phase of a new product, and throughout its life cycle, many parameters, more or less objective, may come into play, leading the company to question the right positioning of its selling price:
- Potential customers' interest in the product may change over time;
- Potential customers' interest in the product may change over time;
- Competitors may offer equivalent or better products at different prices;
- In order to improve profitability, the company may have to revise its pricing policy or general sales conditions;
- The product does not live up to all its promises, and its selling price does not correspond to the "value attributed" to it by customers.
Anyone who has ever had to estimate a sales price (customer, retailer, marketing or sales manager, competitor) knows that this component of the offer is often complex, evolving and subjective.
Identifying and understanding the different "angles" from which a price can be observed and analyzed is an essential prerequisite to examining price defense methods. In fact, there are several approaches to analyzing or defining a price. For example, a financial manager will look at the price from the angle of margin, a sales manager will be more sensitive to competitors' prices, a customer will try to estimate the value the product represents for him, etc....
To understand these different aspects of pricing, we have selected 4 main approaches:
* Financial logic
* Customer logic
* The company manager's logic
* Sales logic
Each of these "facets" presents a key pricing component with its own characteristics and mechanisms.
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... the price of a product or service is relatively complex and subjective. It lies at the crossroads of several approaches and interests. Depending on the different approaches, it raises very different issues:
The "income" price (the financier's point of view)
* What does the company earn?
* How much more volume do we need if we lower prices to be more competitive?
* Is it possible to achieve this additional volume?
* What reduction in costs is needed to compensate for the price cut?
Value pricing (the customer's point of view)
* How do my customers perceive the value of my overall offering?
* What are their motivations?
* Can they afford it?
Competitive" pricing (the salesman's point of view)
* What are the strengths (+) and weaknesses (-) of my overall offering compared with that of my competitors?
* What value do these differences have in the eyes of customers?
* What price differential can my offer bear, given these differences?
Strategic" pricing (the manager's point of view)
What business strategy should price reflect?
What are the consequences (positive or negative) of a price decrease or increase?
Can we do it? Can we do it? For how long?
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Extract from: " Défendez votre prix dans la vente " - Daniel HUYOT - Philippe LAFAIX - Editions d'organisation - 2001-2002.