The pricing strategy: trust us, no other lever has a more significant impact on your pricing. But many firms, including logistics companies, make the mistake of setting their pricing strategy based on historical data or their gut feeling. However, you can you get closer to your pricing targets without having to rely on old data or your gut feeling.
According to reputable retail consulting companies, the combined effect of intense industry completion and rising transportation costs can reduce the importance of creating a dynamic pricing strategy. For a flexible pricing strategy that meets the needs of your customers, what variations in the pricing strategy should you look out for?
Amidst the keen competition, many logistic firms find it challenging to communicate the right process to customers. The right pricing structure has the power to stimulate growth and drive profitability within the logistics and transportation industry. What they should focus on is value pricing, setting the price based on customer value. According to a recent study, prices based on a logical and structural approach will give rise to two to five percentage points of return on sales. Even after selecting the right pricing strategy, firms find it extremely challenging to implement the strategy successfully.
The big question is, how should companies go from strategy to implementation? How do you embed a new pricing approach within a logistics firm? Strategy development is easy but the implementation is the dirty part and this is where it can go wrong. To make the process easy, we have identified six key factors that will lead to a successful pricing strategy.
- Make pricing strategy a top management priority. It’s essential to have board level awareness on the importance of implementing a pricing strategy. Senior management should be on the cards too and then you can implement the strategy throughout the firm. Also, support from top management is essential to create a profit-oriented culture to effectively deal with price wars, which are quite common in the logistics and warehousing industry. Communicate your pricing strategy through press releases and interviews.
- Phased roll-out. If you want to lucratively execute the pricing strategy, set measurable targets that are achievable and lead to a clear goal. Identify the pricing topics that will impact the bottom line. According to the pricing consultancy in Antwerpen, one price topic can be a price waterfall which clarifies steps to take for profit optimization. However, you can’t take on all the price topics at once. The key is to learn the art of prioritization. Evaluate each step and create a phased approach. Adjust the implementation road map after each phase and re-prioritize.
- Embed the new pricing structure. Your price optimization project must have a structure that will aid the decision-making process. The system can include peer comparison or price driver analysis. While methods or checklists fade away after time, they are the tools that will help you to translate your pricing strategy into a practical process, translating a user friendly, simple pricing strategy.
- Communicate early results to a broad audience. If you think a price implementation program will happen overnight, you are wrong. To gain significant buy-in for a new pricing strategy, it’s essential to communicate with the audience in your firm. By doing so, every member of the team will support the implementation process. To make employees a part of the success, share achievements of milestones and celebrate the success with them.
- Have clear governance and define responsibilities. Many firms make the mistake of dividing responsibility between functions and departments. This leads to limited ownership and sub-optimal pricing decisions. Pricing responsibilities vary from sales, marketing and product management. For successful implementation, create dedicated pricing teams, assign tasks and responsibilities; create a perfect balance between central guidance and local responsibilities over the different functions.
- Start small and improve continuously. For implementing a new pricing strategy, you may have to change the existing processes and develop a new way of working. Change can never happen in one day; start small, learn and then roll out. Start with a small pilot plan and scale up gradually. By doing so, you can continuously refine and improve your pricing solution on the basis of lessons learned from the implementation process.
How to succeed
The price implementation process is not always easy and clear cut. According to the consultancy in Antwerpen, treat the price implementation project as a marathon and not a sprint. Apart from the above tips, set clear KPIs, assign responsibilities and plan for better communication throughout the organization.
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