Pricing for Executives — is your price right?

Consumer-led pricing overview for executives. Key questions and approach.

Do you know the right price?

Calling all CEOs: If a genie offers to improve either your pricing, sales, or costs by 10%…choose pricing! It makes the biggest difference, because it is all profit. If for some reason the genie never appears, follow the consumer-led approach to pricing. Study the category and consumers, develop insights & new price options, and anticipate the impact on your business.

I. Pricing context matters

A writer once told me, “You can’t dive right into the dialogue. You start by describing the room, the aroma, a painting on the wall…give the context where the conversation took place.” Before putting your price under the microscope, first remind yourself of the landscape. What and who is driving the market? What are the key new products, what are their characteristics, and how do they align with emerging consumer trends?

Detailed questions:

What is the size and growth of the overall market, each company, each product offering (e.g., small packs in the checkout vs take home bags) each key retail channel (e.g., Grocery, Convenience Stores, online)? Are your products in the growing areas, or shrinking ones? Who are your consumers, what do they value, and how are their preferences evolving?

NOTE — if you don’t have access to market and consumer data, there are a number of creative approaches. The most basic may be surveying your sales team

II. Be a student of history, but live in the present

Pricing is very dynamic — the right price yesterday may not be the right price today. Unfortunately, too many companies only look at pricing strategy every few years when costs have increased, instead of developing a pricing strategy aligned with their mission, and then proactively seeking opportunities to grow profitably.

Detailed questions: Do you have a pricing strategy that aligns to your strategic objectives? Can anyone elaborate what it is? What happened the last time you changed price? How did consumers respond (what is the price elasticity of each product, or in other words, when you increased price by x%, by how much did your unit sales decrease?) How did the competition respond?

Extra credit: How did different groups (or segments) of consumers respond differently (did you lose your most/least valuable?)

III. What is the right price? Look at the data and develop options.

In the key places you are selling, examine the available pricing data (and where lacking, use surveys and interviews) to understand the competition’s pricing strategies and compare performance. Complement the data with visits to retailers, websites, and sample competitors’ products if you haven’t already. These insights will help you develop a range of new pricing options to model for financial impact.

Detailed Questions: What are consumers paying for my core products in key outlets (and how does it vary across these outlets)? How does it compare to the competition (typical price and when on discount)? How much of a discount do I offer for the larger package? Have I crossed or am I near any “magic” price points (key pricing thresholds where volume drops massively?) Are there any price ranges that are growing and would be ‘white space’ for a new product?

IV. Predict the future

Using the above analyses (especially price elasticity) to calculate the financial impacts of your different options. If you aren’t confident in your assumptions or want more data, you may also consider a predictive study such as a This type of consumer research lets you survey only your target consumers (e.g., people who bought beef jerky lately in your top retailer) and present them different options in a replica retail setting.

Detailed Questions: What is the impact of each of your options on your sales & profit? What about for your major partners (retailers)? How does each price option fit with your brand strategy & positioning, and how consumers feel about the value of your products?

*Remember that in a retail environment, retailers set price at their discretion. Manufacturers can only recommend a suggested resale price (SRP)

Related publications:

Consumer Price Promotions — how much, how deep?

Do you believe in Magic…Price Points?

Consumer Led Pricing

Consumer Led Pricing explores the powerful topic of Pricing Strategy for a target audience of small brand CEOs. Daniel Scharff, the author, is the Director of Pricing and Growth Analytics at Bay-area startup Hampton Creek. He holds a BA in Psychology and an MBA from Wharton.

Daniel Scharff

Written by

Director of Pricing @ food tech startup. Formerly Global Pricing at Mars, Psychology B.A. and Wharton MBA

Consumer Led Pricing

Consumer Led Pricing explores the powerful topic of Pricing Strategy for a target audience of small brand CEOs. Daniel Scharff, the author, is the Director of Pricing and Growth Analytics at Bay-area startup Hampton Creek. He holds a BA in Psychology and an MBA from Wharton.