This detailed self-assessment audit can be used:
- to measure and improve the effectiveness of your present pricing strategy
- or to create a sound pricing strategy where none exists.
First, use the audit to understand the 5 factors to consider when setting prices - and how to balance them. Then get clear answers to questions like these:
- Does your pricing strategy support broader corporate objectives?
- Have you fully understood the influence of price on your customers?
- Do you use price correctly as an indicator of product/service quality?
- Do you use reference prices and differential prices effectively?
- How well do you use breakeven and profit analysis?
- Do you use appropriate pricing strategies at different stages in the product/service life cycle?
- How do you use promotions and discounting?
- Have you considered the legal issues? The audit doubles as a complete introduction to the whole question of how to set prices and calculate the consequences of your pricing decisions.
The audit's 7 steps are:
Step 1: Assess the Consistency Between Corporate and Pricing Objectives
Step 2: Assess the Relevant Economics for the Pricing Strategy
Step 3: Determine How Your Buyers Perceive Prices
Step 4: Determine the Relevant Costs for the Pricing Strategy
Step 5: Determine the Characteristics of each Specific Price Decision
Step 6: Integrate Specific Price Decisions into an Overall Pricing Strategy
Step 7: Assess the Administrative Structure for Managing the Pricing Function.
