It’s common for businesses to follow every cent of income, regardless of the cost, when they go into survival mode during hard economic times. This strategy comes with serious effects and can result in the reduction of margins and loss of profit in the long run, even though it actually tends to bear positive fruits in the short term. Companies should aim to maintain margins while adopting best practices and strategies to grow their business. Although rarely used in a traditional sense, even by top performing organizations, effective pricing is an essential approach to solving the above problem. Pricing has gained ground over the last few years due to a number of factors:
Quantifiable Results: A variety of industries have seen value-adding results from effective pricing strategies
Room for Growth: The value of pricing has only been realized by a small group of organizations
High Returns/Low Associated Cost: Organizations are reaping huge rewards from low investment
Faced with the question, how can companies use effective pricing strategies to grow income and maintain profitability at the same time? More and more companies are starting to turn to data protection officer outsourcing to take care of the legalities whilst the company focuses on customers. It’s recommended that you turn to these best practices to ensure that your organization can enjoy the results of effective pricing while focus shifts to buyers.
1. Think About Decision Support In Pricing
CRM systems are used by a majority of organizations. In most cases, however, these systems are not used in decision support, instead being employed in the collection of data. The huge mountain of data relating to transactions and deals collected through these systems over time can bring about effective pricing and better deal negotiation if used correctly. For instance, the data can be used in setting guidance and floors to be used in negotiations by sales teams interacting with clients, or in coming up with well-informed pricing goals.
2. Discriminate Products and Buyers
It’s common for companies to approach all buyers in a similar way. This does not distinguish profitable clients with a high potential for return business in future, from an unprofitable one with low potential. Similarly, companies fail to tell apart the value different customers place on the various products on offer. For instance, a given product might be used as a primary input in a certain industry, while bearing minimal importance in a totally different industry. In this case, the organization can discriminate the product with regard to the intended application. As such, the pricing approach should be strict, with a minimal discount, for the industry it is used as a primary input, as compared to the pricing of the same product to be sold in the industry in which it’s not as useful in.
3. Well Informed Sales Teams
To grow income and profits, sales teams require important decision-making insights when dealing with customers. It’s common to see discounts offered as a result of negotiating prowess instead of the sales representative’s knowledge of important details on the buyer’s future potential, buying history, expected product value and profitability. Sales representatives armed with pricing guidance focused on distinct buyer profiles can offer pricing conditions that are in line with the buyer’s profile by crafting customized negotiations for each one. A well-informed sales team can help maintain the organizations profits by winning more deals.
4. Implement Swift Price Adjustments
Well-timed price variations can determine whether you win or lose a deal in today’s cut-throat environment. Organizations involved in the sale of many different products that are used in different industries, geographical regions and through different channels have to manage a countless number of price points at the same time. Getting a deal to go through at a profit as opposed to doing so at a loss can be helped along by the organization’s capacity to adjust prices in response to market pressures.
5. Leverage Technology
Only a handful of organizations have prioritized pricing from a strategic point of view, or invested in changes meant to help them take advantage of it in negotiations with customers. Current ERP (Enterprise Resource Planning) and CRM (Customer Relationship Management) systems do not have the capacity to optimize pricing methods. Price optimization and management solutions are designed to better fulfil this requirement through their strong and reliable price setting, pricing analytics and deal negotiation capabilities. The solutions incorporate ERP and CRM systems thus enabling organizations to enhance negotiations with buyers through the use of proper pricing approaches.