Wednesday, September 09, 2015

Pricing Strategy: Don't Change it too often

There is a lot of hype around pricing. You only have to see the large number of pricer positions springing up everywhere. It is easy to understand: by managing properly your pricing strategy you may:
  • grow your profits by having a direct impact on net profit
  • Developping customer preferences by altering the price image of one brand/retailer.
And as a matter of fact, the new big data technology allowed to implement new pricing strategy fast:
  • By allowing to have large data base to evaluate the impact of different prices alternative
  • By enabling deep analysis of those alternatives
  • By changing price tags fast, especially thanks to E comemrce and electronic price tags in store.
But the Harvard Business Review is actually alterting that too many pricing strategy changes may hurt deeply your business:
  1. It creates confusion for customers, that would rather postpone their purchasing decisions
  2. It will trigger your competition into a pricing war that will in the end be destructive and result in a loss of control of your own pricing strategy
  3. By changing too much prices, you will get the attention of customers on pricers rather than on product features, and it could actually change its decision making patterns, and you could lose some of your brand attributes, and lower your brand loyalty.

This is the reason why, despite the importance of the new pricing strategy definition, you must