Why Pricing Matters?
Back in the 1990s, Walmart went through a massive expansion in the U.S. that brought lower priced goods to all 50 states (Vermont was last in 1995). Not only did Walmart compel their competition to look at how products were priced, they also pushed that philosophy to their suppliers with requirements for year-over-year cost reductions.
Today Amazon is the new Walmart, with both the Prime service as well as a platform from over one million U.S.-based small and medium-sized businesses (more than 20,000 small and medium-sized businesses worldwide surpassed $1M in sales on Amazon in 2017). Their platform brings worldwide products to a single platform which has made price comparison simple and the immense competition has driven prices down for consumers.
Walmart and Amazon are just two examples of how supply and demand forcing access to data and competitive pricing have mandated new pricing models on suppliers, competitors and the market as a whole. So far in our the 3 Pillars of Growth series, we took a deeper look at Participation and Targeting, today let’s unpack pricing and the many dimensions that drive a price up or down.
Imagine your network. Now imagine all your new products in five years. Lastly, think of what services are entering their end of life. These items make up your current and future supply-side drivers. Areas of expected growth or locations with new service may get pricing discounts to help drive sales and adoption. Products heading toward end-of-life might be priced above market rates to disincentivize prospects from those items that you are not looking to sell in the future. The supply side of the equation is something network operators have full control over and is driven by several areas of the overall organization and their respective needs.
Customers and prospects look to you for services however where those services are provided, what size and speed they require from you and when they are looking to purchase are all items that drive the demand side of your business and the pricing models you may need to create. Two identical customers looking for the same product in different geographic areas, can need very different demands of your installation team. Also, that one-off customer looking for a single location is quite different from an enterprise asking for service at twenty locations. These different levels of demand create additional layers of complexity to your pricing models and unlike the supply side, demand is something typically driven by forces outside your control.
Market Forces and Competitive Landscape
The move to 5G, Mergers and Acquisitions, Competitor’s Promotional Pricing, New Federal or Local Laws; all of these items (and so many more) are shifts in the market that effect pricing. Some result in lower pricing to meet the market while others elicit raising prices to capitalize on market opportunities. In all cases, these market forces push you to review your current pricing constantly to stay competitive and to extract the most return on your sales and marketing efforts.
In our world where there are Supply, Demand and Market shifts at play simultaneously, not only does Pricing Matter but the ability to develop complex pricing models. Understanding these dimensions, which at times will compete, should allow you to sharpen your pricing models to maximize opportunities, sales and ideally margins. The intersection of higher rates of closing business and increasing your margins is the “nirvana” of sales and marketing with regards to pricing models.
As we head into 2019, consider how you are Participating in the market, Targeting the right customers and how you present your best Pricing to drive growth into this year and beyond. By getting all three pillars lined up for your business, you should find yourself having unanticipated growth for all parts of your business.