Pricing

Many business owners are bemoaning ‘the race to zero’ – the seemingly irreversible trend toward lower and lower prices. Then how do you explain these results?

2009-2012Revenue ($billion)Compound Growth RateOperating Margins
Apple$36 ➠ $156 44.3%22.9% ➠ 37.4%

↑14.5% ➢ 63% improvement
Panera$1.4 ➠ $ 2.110.7%15.4% ➠ 17.6%

↑2.2% ➢ 14% improvement
Walmart$408 ➠ $4693.5%7.6% ➠ 7.7%

↑.1% ➢ 1% improvement
Amazon$24 ➠ $6126.3%6.6% ➠ 4.6%

↓2% ➢ 30% decline

Let’s not forget what the economy was like during 2009-2012.

  • Economists tell us the recession ended in June 2009.
  • The stock market was just beginning to show signs of recovery in 2009 to early 2010.
  • Most people’s IRAs and home values were still in the tank.
  • Unemployment was still 50% higher than what is considered normal.
  • Many people were underemployed or hadn’t had a raise in several years. College graduates were facing one of the toughest job markets in over 7 decades.

We would expect these conditions to favor low-price strategies, but the results show that consumers paid huge premiums for items that weren’t essential to their well-being.

Want out of the race?  Call me at 314-707-3771 and I’ll shine a light on the path to higher prices and even greater sales growth.

Losing Sales?

If any of the 5 elements (on the right) are missing or incongruent, you’re losing sales. You’re sending conflicting messages about the value of your offerings. Confused prospects either keep searching for the value they desire or go with the lowest price.

Stop losing sales! Give me a call at 314-707-3771.

Warren Buffett on Pricing

“…if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.” – Warren Buffett.

With all due respect to Mr. Buffett, I believe that’s a bit harsh. While I agree that a 10 percent price increase should be a slam dunk, I don’t believe that those reluctant to effect such an increase have terrible businesses.

My experience has been that the reason why companies don’t raise prices with greater confidence is that one or more of the elements of the pricing pyramid are missing or incongruent.

Pricing pyramid R2

1. Brand Promise
2. Psychographic Profile
3. Positioning Statement
4. Sales Scripts
5. Bundling & Pricing