Finance director falls in love with Marketers .

Some more thoughts on pricing following on from the earlier post ” Strong brands , Timid pricing”.

Smart pricing is very much “Inspired ” marketing . Its the one “P” amongst the 4Ps which can have potentially the biggest impact on the real P ( profits) . A much overlooked element of the marketing mix , it rarely gets the attention of Brand managers , Marketing managers and definitely not of the communication partners . But it gets a lots of attention from retail owners ( and they are the new media moguls -more on that in another post) and of course from the in-house bean counter .

The need for getting pricing right has never been stronger with upward pressure on , (a) production costs due to commodity price boom and manufacturing complexity , (b) media costs due to fragmentation , (c) Trade margins due to retailer power and (d) R&D costs due to increased need for innovation .

Here is what the BIG MAC of consulting found :

Consulting and research giant McKinsey’s study of 2,400 US companies found pricing was a more important factor in profitability than almost any other strategy. The research found a 1% price hike could boost profitability by 11%, whereas a 1% reduction in fixed costs only improved profitability by 2.3%, and a 1% increase in volume only added 3.3% to the bottom line.

In today’s data rich retail environment getting pricing right is not very difficult . There are enough statistical models , marketing analytic experts available and with a bit of robust in-market testing consumer goods owners can hit the pricing sweet spot , which makes both retailers and brand owners happy .

Think of it as a potential source of funding for investment in the other Ps. Your finance director will love you – More investment for long term growth without any short-term bottomline impact .

Its not “sexy” or Inspired marketing one might say . But smart pricing might give you and your communication partners the organizational leeway for what you think is really “Inspired Marketing”.

2 companies come top of my mind when I think of smart ( or shall I say Inspired ) pricing – Apple and ZARA . Priced at just the level you think ” Its worth it “.

The intention here is to get you thinking about it and not to be a treatise on the various theories and models available on pricing .

Read more on pricing here


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