Evaluating your pricing performance with the Pricing & Value Diagnostic Checklist

Liam Hannaford is the Marketing Manager at Ibbaka

Pricing is a critical aspect of any business, yet it often fails to receive the attention it deserves. We’ve seen many companies overlook the impact that their pricing has on their overall revenue performance and profitability, so to ensure that your pricing strategy is optimized and aligned with your business goals, it's essential to regularly evaluate and diagnose your pricing performance. 

The Pricing & Value Diagnostic Checklist is now available to help you assess your pricing process, identify areas for improvement, and take corrective action.

First off, let’s establish some common questions when it comes to evaluating pricing:

1. Do you have a discounting problem?

2. Is leadership in alignment with your pricing strategy?

3. Is there an opportunity to increase prices?

4. Are you collecting the data you need?

Discounting problem?

Discounting can be detrimental to your profitability if not managed effectively. In our “Before taking pricing action, manage discounting” blog post, Steven Forth says that to manage your discounting, you should understand why sales offer discounts.

To take control of discounting, here are some steps to take into account:

1. Gain insight into the magnitude of the issue through analyzing price variations

2. Identify areas of revenue loss through a comprehensive analysis using a pocket price waterfall

3. Gain understanding of the underlying factors driving price discounts

4. Establish clear guidelines and protocols for implementing discounts

   a) Implement a structured system for offering discounts

   b) Provide guidance on target and maximum allowable discount

5. Equip the sales team for success

   a) Provide training and necessary sales tools to support the team

   b) Establish appropriate incentives to motivate the sales team

Getting alignment with your pricing strategy

Ensure that your pricing strategy is well-communicated and understood by the leadership team. This includes communicating your value proposition and knowledge of pricing dynamics:

• Market dynamics

• Competitive positioning

• Customer segmentation

• Value-based pricing

By using data-driven insights, such as market research and customer analytics, you’ll be supporting your pricing strategy and at the same time, building collaborative relationships by involving leadership and the team in the process.

Sharing success stories and consistently providing updates and performance reports, you can effectively demonstrate the positive outcomes and effectiveness of your pricing strategy. This approach will help secure leadership support and foster their ongoing commitment to the pricing strategy.

Getting alignment on pricing is mission critical and if there is a lack of alignment, it will undermine any strategy you may have. 

Opportunity to increase prices?

Regularly assess your pricing levels and compare them to the market and your competitors. Evaluate whether there is room for price adjustments upward to better reflect the value you deliver. Consider factors such as:

• Customer willingness to pay,

• Market demand, and

• The uniqueness of your offering.

Identify opportunities to capture additional value through strategic price increase.

Implementing a price increase can rapidly enhance both recurring revenue and net revenue retention. Even a small 1% increase in prices can yield a more significant impact on profit compared to a 1% increase in revenue or a 1% reduction in costs.

See: Customer Segmentation for Price Increases & Are B2B SaaS companies getting too aggressive with 2023 price increases?

Gather the right data for success

Data plays a crucial role in effective pricing decision-making. Evaluate whether you are collecting the necessary data to analyze pricing performance and trends. 

Pricing relies on models driven by data, encompassing both a value model and a pricing model.

These models are constructed based on data, and data interpretation is facilitated through models. To achieve successful pricing outcomes, it is imperative to collect relevant data. Consider metrics such as:

• Customer acquisition cost (CAC)

• Customer lifetime value (LTV)

• Price elasticity, and

• Market segmentation.

Here is the data you need to collect to inform pricing actions.

The Pricing & Value Diagnostic Checklist provided serves as a valuable tool to conduct a rapid evaluation of your pricing performance and processes.

Discover new horizons as you take decisive corrective measures that propel your pricing strategy to unprecedented heights of success!