Setting Strategic Pricing Goals

In nearly every business there are performance goals of many varieties. Consider sales goals, cost reductions goals, margin goals, production goals, quality improvement goals and the list goes on. Rarely do we see a company with pricing goals. That is, using pricing as a strategic initiative to improve revenues and profit margins.

For many manufacturing and wholesale distribution firms there is a low level of awareness of strategic pricing and related goals. Strategic pricing uses data to determine price points on a transaction by transaction basis. (This is the very short definition of strategic pricing.) Think of using your historical pricing data as a reference point to help determine future prices. Using this data helps to create a pathway forward in price setting and ultimately price improvement that drives revenue and margins.

While many manufacturers and wholesale distributors may not be applying strategic pricing there are still opportunities for setting pricing goals. Pricing goals can be derived from actual increases in prices, reduced discounting, or stopping price leaks. Price leaks include freight allowances, excessive discounts, waived small order fees and the like.

Addressing just one of these areas and setting measureable price improvement goals is just one way to draw a focus toward strategic pricing and get your team to start thinking about pricing from a strategic standpoint. Then, of course, the key is to measure actual performance versus the set goals.