Getting the price right

A、

Chief executives need to pay more attention to pricing, according to Roberto Lippi of the Apex Group, a consultancy that offers advice on pricing strategy.He accepts thatlow inflation figures in many industrialised countries makes raising prices tough, but argues that this should not necessarily deter companies. He gives the example of the airlines, which, with their minimum stay requirements and massive premiums for flexibility, led the way in sorting customers into categories,based on their willingness to pay.

B、

The key to pricing is to avoid alienating customers. As Lippi points out, once a bad price has been established, it can be very difficult to turn the situation around.He gives the example of a consumer goods company thatwent bankrupt largely because itdid not price its digital cameras properly. In contrast, he cites the case ofa Swiss drug company thatintroduced software for every sales representatives laptop, enabling them toprovide consistent and accurate price quotes. To help staff with this innovation, the company also created a new post of director of pricing strategy.

C、

Many of todays managers have the benefit of modern technology to help them with pricing. Supermarket chains, for example, can easily track customerselasticity -how their buying habits change in response to a price rise or a discount. But although a company can now measure this sort of thing in a more sophisticated way,following basic rules is still the most common way of setting prices. Most bosses still worry more about their costs than the prices they charge; one recent survey found that they spend as little as 2% of their time on pricing.

D、

One popular approach to pricing is illustrated by the car companies that charge extra for product add-ons such as electric windows, instead of offering them as part of the standard price. Although many customers are prepared to pay extra, Lippi recommends that companies make sure that price differences reflect real differences in the product, either in quality or in the extra service on offer.The worst approach is to try to keep the pricing structure secret from customers.Nowadays, that is more likely to lead to lost contracts than large profits.

Getting the price right

A、

Chief executives need to pay more attention to pricing, according to Roberto Lippi of the Apex Group, a consultancy that offers advice on pricing strategy.He accepts thatlow inflation figures in many industrialised countries makes raising prices tough, but argues that this should not necessarily deter companies. He gives the example of the airlines, which, with their minimum stay requirements and massive premiums for flexibility, led the way in sorting customers into categories,based on their willingness to pay.

B、

The key to pricing is to avoid alienating customers. As Lippi points out, once a bad price has been established, it can be very difficult to turn the situation around.He gives the example of a consumer goods company thatwent bankrupt largely because itdid not price its digital cameras properly. In contrast, he cites the case ofa Swiss drug company thatintroduced software for every sales representatives laptop, enabling them toprovide consistent and accurate price quotes. To help staff with this innovation, the company also created a new post of director of pricing strategy.

C、

Many of todays managers have the benefit of modern technology to help them with pricing. Supermarket chains, for example, can easily track customerselasticity -how their buying habits change in response to a price rise or a discount. But although a company can now measure this sort of thing in a more sophisticated way,following basic rules is still the most common way of setting prices. Most bosses still worry more about their costs than the prices they charge; one recent survey found that they spend as little as 2% of their time on pricing.

D、

One popular approach to pricing is illustrated by the car companies that charge extra for product add-ons such as electric windows, instead of offering them as part of the standard price. Although many customers are prepared to pay extra, Lippi recommends that companies make sure that price differences reflect real differences in the product, either in quality or in the extra service on offer.The worst approach is to try to keep the pricing structure secret from customers.Nowadays, that is more likely to lead to lost contracts than large profits.