The Economist Group: Give marketers the price gun

January 22, 2014-

By Sebastian Mamro

Consumer data can help price products and services for premium sales

As we start to see signs of optimism in the economy, many business leaders want to deliver growth by focusing on how to sell more.

Sales growth requires executives to address that eternal question: what to charge the customer?  Traditionally gut instinct has informed pricing strategy, but this can be misguided. If the sales team gets it wrong, businesses risk undervaluing their products and missing out on profit opportunities.  In the pressurised environment of closing a sale, an executive may simply aim for the highest price they feel they can get away with, rather than leveraging their knowledge of customer behaviour to reach a better pricing decision.

Marketers and business leaders need to rethink their approach to pricing, making decisions on data-driven insights rather than instinct.  This is an approach that will deliver results straight to the bottom line: for any business, capturing a few extra points of value per unit can make a huge difference to profitability.

Organisations have access to mountains of data about customer behaviour, price performance and purchasing history.  Much of this is an untapped goldmine.  Here is the opportunity to gain advantages from data sources that cover customer relationships, products, transactions, costs, competitors, sales pipeline and inventory to understand what makes each customer tick.

Sales teams can improve how they position and sell value to customers with this data, thereby increasing revenue. Knowing customer behaviour, buying patterns, likelihood to purchase and willingness to pay means pricing decisions can be made based on fact, not guesswork.

With access to real-time accurate information sources and the right data science, sales teams can have the confidence to create more compelling proposals, are able to upsell value and secure higher prices.  Getting better at pricing is not only a profit opportunity, it will also deliver a competitive edge.

However this data-driven approach requires culture change within an organisation. Technology drives value through improved decision making, but too often the tools, data—and more importantly, the mindset—are held in isolation within the organisation.

Here is a valuable opportunity for marketers to see the bigger picture by connecting the dots between finance, sales, marketing and product development. Change will require buy-in across each of these teams and collaboration across all areas of the business.

So it’s time for marketers to start exploiting the customer data at their fingertips and change their thinking on pricing.  After all, who can afford to take a chance on pricing when your existing data can help end the guessing game?