Apr
19

Equal Pay for Women – A Pricing Perspective

By on April 19, 2014 · Comments (0)

rosie-the-riveter-poster-sEqual pay for women has been in the news a lot lately. Depending on what research you read, women make only 77 cents for every dollar a man makes. Presented like this it certainly seems unfair. And it seems to imply there is a bias against women in business.

In my view, your salary is the price you put on yourself. If you are worth more (i.e. add more value), you can charge more. Your customer (which is your employer) decides if you are worth your price.

Here’s the secret: Businesses are greedy. They want the best workers for the least amount of money. Most companies and managers couldn’t care less about your gender, race, hair color, height, etc. If you can make them more money than your competitor (another possible employee) they want you. They will pay to hire you if you can convince them. They will pay to keep you when you demonstrate it.

Imagine what would happen if this wasn’t true. If managers or companies intentionally underpaid high performing women, just because they are women. In this situation there would be a lot of low-priced talent waiting to be snatched up by an enterprising company. We should see companies who only hire these women out of their under-appreciated positions become wildly successful, because they are able to land great talent.

Business people are more greedy than biased.

Here’s an example. Most Americans would probably prefer to purchase things that are “Made in America”. And most US companies and managers would surely rather hire and manage Americans than go overseas. However, manufacturing moves overseas. Why? Because companies get similar quality work at lower prices. Making more money (greed) overpowers bias.

I’ve worked with some amazing women, who were much smarter and more talented than me. I took a negotiating class with a woman who beat her counterparts every time. I’ve seen women work far more hours than me. I know many women who make far more money than me, and they deserved it.

On the other hand, I’ve also known very talented and aggressive businesswomen who, once they had a baby, wanted to work fewer hours so they could be with their children. Nothing wrong with this. It’s a choice.

I’m not an expert on all of the social issues, the biases that happen while raising girls vs. boys. But I am very experienced in business. Businesses are greedy. They want to pay the lowest price for the highest quality in every situation. Labor is no different.

If you, woman or man, want to make more money, add more value. Companies pay more for value.  If yours won’t, another will.

Categories : Value
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Apr
16

Pricing Course for Product Teams

By on April 16, 2014 · Comments (0)

Price

Today, April 16, Pragmatic Marketing announces a new course called Price. As the lead content developer, I found the experience fascinating.

The course was developed to help product managers and product teams be more effective through pricing. The question I struggled with though, “what do product people need to know about pricing to do their job well?” The answer turns out to be “a lot”.

First, understanding how buyers use prices to make purchase decisions helps product people truly understand value. They understand which products have value and why. When product people clearly understand where value comes from, they are better prepared to create products that have more value.

Product teams are often involved in creating pricing strategies. Understanding price segmentation and the different ways to charge different customers different prices produce increased profits.

Product people also manage portfolios (at least they should). Pricing knowledge guides them in their abilities to create the proper versions and complementary products that drive profit to the portfolio and the company.

Product teams often are in the escalation path when salespeople are looking for better prices on specific deals. It turns out product people have the ability to help salespeople be more confident they can win at higher prices.

As you might imagine, these are the four main topics in the pricing course.

This really was a fun experience.  I got to work with a great team of marketing folks at headquarters.  They continually re-focused me on the topics that were most important to product teams.  In the end, I’m very proud of the final course and hugely grateful for their help.

If you’re interested in learning more about the class: pragmaticmarketing.com/courses/price

Categories : Announcements
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Apr
09

Fixed or Flexible Pricing? That Is A Question

By on April 9, 2014 · Comments (0)

Vegetable marketFrom a reader:
Dear Mark,
Currently, I carrying out a graduation project for a company in Ethiopia. The graduation project is the final part of my study BSc. Business Engineering which I follow at the Utrecht University of Applied Science (the Netherlands).
The pricing strategy of the products of our company (mainly fresh vegetables) is a main subject of this project. I find out if it is possible to use a fixed price for our products. My question for you is:
1. can you provide some scientific information about the flexible/fixed price topic?
2. what are your opinion necessary conditions for handling a fixed price?
I am looking forward to your response. If you require any further information, feel free to contact me..
Thank you in advance
Yours sincerely,
Harro

Hi Harro,

I’m not aware of any experiments or empirical data on fixed vs. flexible pricing.

I’m typically a strong proponent of flexible pricing. This makes sense because pricing is about charging customers what they are willing to pay, and different customers have different willingness to pay. That said, when would fixed pricing make sense?

When there is price transparency. In other words, everyone knows what someone else paid. Some companies who sell to government agencies face this because the information is available to the public. Not many other industries have this.

When there are many low value transactions. When you go to the grocery store, you don’t haggle prices over a bag of potato chips. You either buy them or not. In this case, the cost of paying trained salespeople to negotiate over little items exceeds what little additional gross profit we might make with flexible pricing.

When your competition does it. If everyone expects you to negotiate and you don’t, your customers will leave you and go to your competitors. To succeed without negotiating in these markets you would need a new and compelling business model.

Most B2C (Business to Consumer) business is done without negotiating. In fact there are very few examples where consumers negotiate here in the US. That’s not true around the world though.

The above are examples of when we don’t negotiate prices, but it doesn’t mean we always charge the same customer the same price. So what is your definition of flexible? In your case, selling fresh vegetables, I wouldn’t negotiate every transaction, but I would be flexible.  Here are two techniques to consider.

First, do you offer a volume discount? The more someone buys, the bigger the discount.

Second, you may want a different price on vegetables that are “ripe today” vs. “ripe tomorrow” vs. “ripe yesterday”. I would assume the “ripe yesterday” would be least expensive, but it lets you move the product while still serving those with very low willingness to pay.

It’s likely there are other techniques for you as well. Think about when customers are willing to pay more and what differentiates that situation.

Harro, if your definition of flexible means negotiate every deal, that gets challenging, as you can see by the examples above. However, even if you don’t negotiate every deal, you can have a set price list for different situations that truly captures more of your customers willingness to pay.

Hope that helps.

Cheers,
Mark

 

Photo by Rootology (Own work)

Categories : Strategy
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Pricing is the most powerful marketing lever you have, but it’s also the least understood. This upcoming webinar shares the inside workings of pricing like you’ve never seen before. It will provide actionable insights and address many of the questions that you face in your pricing strategies:

Value-based pricing. What is it? How do we know how much value we offer? How can we create more value so our customers will pay us more?

Price segmentation. How do we charge different customers different prices?

Portfolio pricing. How does pricing relate to versions and complements? What can we do with our portfolios to make more money?

Join Pragmatic Marketing Instructor Mark Stiving as he delves into this often intimidating topic with information to help you succeed. Register now.

Categories : Uncategorized
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Mar
31

Pricing at Launch – A Myth Debunked

By on March 31, 2014 · Comments (0)

WeightlifterWhile talking with companies about how to set a price at launch, I frequently hear the following comment, “We need to start high because it’s harder to raise prices than to lower them.” In fact, this comment passes my ears so often it needs addressed.

First, it’s true in some situations. For example, if we have a recurring revenue stream, like DirecTV, nobody complains if we lower our prices (except our shareholders), but try increasing prices and we hear from far too many customers.

However, most markets are not like that. What if our product is such that people buy it once and don’t purchase again for a long time (say more than a year)? Those who purchased at one price may not remember the price they paid when they go to buy it again. But even more important, new buyers typically have no idea that you once offered the product at a lower price.

Customers won’t complain if they never knew about your lower price or if they don’t remember the price they previously paid. In these situations, which are far more common than recurring revenue situations, raising prices after launch is not hard at all. Of course, if you have a big splash product, like the iPhone when it first came out, your prices are reported all over news and many people are watching. Raising prices then is hard.

Now let’s revisit recurring revenue business. When we raise prices, it will likely cause pain with our current customers.  However, we don’t have to raise prices on everybody. What if we held the low price for everyone who signed up early, but raised prices for new customers. New customers rarely know there used to be a lower price. Even if they do, they are typically forgiving because they didn’t sign up earlier when those rates were available.

This is not an argument for pricing low at launch. In general I’m a huge fan of higher prices. However, this is an argument for not over-emphasizing the difficulty of raising prices later. You want to be forward thinking in your launch pricing decisions, just don’t limit your possibilities.

Categories : Strategy
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