Sales, Marketing & Growth
Fact Based Pricing - How to maintain a healthy pricing strategy
To improve profitability, companies can utilize pricing models to shift customer demand to become aligned with core operational processes.
Overview
When sales volumes are down, price becomes the only revenue-lever that companies can address to maintain profits. While the thought of price changes can be overwhelming to many businesses, when approached correctly, price manipulations can have a significant impact on companies’ bottom-line. Changes in price should not be made without careful consideration. If poorly executed, unthoughtful pricing changes can do more harm than good to a company’s performance. However, a fact-based approach can address concerns about price adjustments while enabling sustainable and profitable growth.
Historically, the most common strategies are market-based, value-based, and cost-based pricing. While market-based pricing sets prices by aligning them with similar products on the market, value-based pricing determines price based on perceived value for the customer. Cost-based pricing, where companies’ influence is greatest, is set based on a determined mark-up. Applied Value’s fact-based pricing draws from the best parts of all of these methods to secure profitability on all products, whether standard or customized. To achieve this end, fact-based pricing requires taking a multidimensional view on both cost and value.