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Why Peanut Butter and Pricing Strategies Don’t Mix

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Are you applying a “peanut butter” pricing strategy to your business? Put another way, are you spreading the same price for each product or service across all customers or all markets?

This approach, also called mono-price-eosis, falls short of recognizing the differences in price sensitivity across differing customers and markets. Nearly every customer perceives the value of your offering in a slightly different way. The key to optimizing prices is to recognize these differences and price accordingly. The same applies to different market segments.  
 
Different needs and different application for the same products should warrant price differentiation. If you look at all the possible applications for your product by all the different customers you will quickly see a matrix develop that can become the foundation for an optimized pricing architecture. This is called price segmentation.
 
Take for example the manufacturer of candy. This company has 500 SKUs, eight different markets and 2,000 customers. In the end, after careful analysis of each of these price drivers, the company resulted in 11,000 different prices for the 500 SKUs. While this may sound complex, the user interface for the pricing system was simplified for rapid quoting and ordering.
 
Take it from the price consulting team at Price Point Partners, make sure to look carefully look at your pricing and determine which markets and customers can support different prices. This may be the beginning of your price optimization program.