Most companies would of course like to get better paid for their products and services. But on account of fierce competition, they believe it’s difficult or even impossible to increase their prices. With the right pricing strategy, however, any company can in fact use prices to improve profitability, regardless of the industry in which it operates. A new pricing model might even result in reducing prices of your core offering, as you simultaneously raise prices of complementary products and services for which price elasticity is lower and willingness-to-pay higher.
There are many reasons why companies might be unhappy with their pricing. Profitability, for instance, may perhaps be insufficient to support innovation, business development and expansion plans. Or maybe revenues don’t match the effort and resources expended, making the exercise pointless in financial terms. Another typical pricing problem is that prices don’t reflect the quality of the product or service, while a further source of discontent could be that competitors are able to charge higher prices for equivalent products or services or perhaps reach better profitability at the same price level.
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