Customers are paying more and more attention to price. You would think that price management would be a high priority for companies. Unfortunately, this is not the case. While functions such as communication are completely overemphasized, price management ekes out a shadowy existence. We present our 5 recommendations for price management below.

1. recommendation

Establish customer-centric pricing: Prices can be determined based on costs, competition, and customers’ willingness to pay. While determining about costs and competition is relatively straightforward, this type of determination does not allow for a deeper understanding of how customers perceive value. For offer development, communication and sales, it is important to understand which elements of the offer have the greatest influence on the customer’s willingness to pay. Thus, customer-centric pricing helps not only for optimal pricing, but also for further development of offers, differentiation of communication activities and success in sales.

2. recommendation

Establish competencies for price measurement: customer-oriented price determination requires that your company has competencies in the area of price measurement. 99% of companies have no competencies in this area. This is a great opportunity for you to differentiate your company from the competition on the basis of these competencies. In the meantime, this is no longer so difficult. There are numerous software application for performing choice-based conjoint analysis (CBC). The application and implementation are well documented. The software solutions calculate the results automatically and present them in an understandable way. We are now seeing that most of the papers in our master’s program are about customer-centric price measurement. Jump on the bandwagon!

3. recommendation

Establish a clear price position and effective price differentiation: if you are able to measure customers’ willingness to pay, you gain greater confidence in determining optimal price positioning. People often think only in terms of cheap and expensive. But price positioning means fine positioning: how exactly do you position your company compared to your relevant competitors? And equally important, what are the arguments or differentiating factors for a higher price? Building on the fine positioning, it is important to check whether price differentiation is possible and to what extent? In doing so, the results of customer-oriented price measurement help you to determine the individual price points for each target group.

4. recommendation

Clear systematics in the discount system: if you have followed the first 3 of our 5 recommendations for price management, it would be a great pity to destroy all the work with a chaotic discount system. Thus, the discount system should also be critically reviewed. From the perspective of customer orientation, it is important to reconcile the freedom for the individual salesperson and the added value of uniform specifications. Try to keep the number of discount levels to a minimum. In this context, discounts should focus primarily on customer loyalty. If exceptional discounts are granted, this must be clearly marked for customers. Many companies give discounts without a disclosure of the actual cost to the customer.

5. recommendation

Continuous development of price management competencies: Customer experience management and communication are assuming such great importance in the public debate. Yet very few companies succeed in systematically improving their price management competencies. Most of the time, there is no pricing champion in the company. The sales team also has little expertise in this area. The introduction of a customer-centric price management commits every year to improve the price management competencies in your company. Price controlling plays an important role in this context.

Conclusion on our 5 recommendations for price management

We hear everywhere and all the time that customers are increasingly looking at price and that this is a high challenge for companies. What surprises us is that hardly any company is building up or expanding price management competencies. Customer surveys using the van Westendorp method or a choice-based conjoint (CBC) are no longer rocket science activities due to digitalization. Any company can use these methods. Customer-centric price management not only helps to determine prices, but also provides a solid basis for decisions in offer development, communication and sales. The results can add value in many places in the company. Our final conclusion on the 5 recommendations for price management: customer-centric price management enables certainty in decision-making, systematic learning over time, and greater opportunities for differentiation among competitors.