The Background Buzz Insider

January 12, 2011

Raise Your Prices

We’re all aware of the slash-your-prices scenario many companies take as a given these days: Yourcustomers demand more and have online access to product comparisons from multiple sellers; you face globalcompetition from rivals that have labor-cost advantages; and the financial crisis has accelerated the commoditizationof more and more markets.The solution? Cut your prices to gain volume and scale.

That definitely works for a few companies. But the reality is a very few. This article is for everybody else: those who choose not to compete on the basis of cost and low price, but on the basis of performance, for which their customers willingly pay higher prices.By competing on performance instead of price, you shift the battle to where your company’s strengths lie — in the ability to deliver uniquebenefits.

So-called performance pricers are adept at three core activities: identifying where they can do a superior job of meeting customers’needs and preferences; shaping their products and their business to dominate these segments; and managing cost and price in those areas tomaximize profits.If you can find these performance segments, manage them cost-effectively, and communicate to thecustomer the extra value being delivered, then as long as your offering is superior to the competition orother alternatives, you will be able to boost both prices and profits.

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