Are you making any of these common pricing mistakes?

“I used to design silicon chips for a living”, says David Abbott. “While that’s not relevant to pricing – the area I specialise in now – it did leave me with an admiration for data, evidence and numbers.”

After that, David worked in a variety of senior marketing roles. In 2010 he became sick of office politics and decided to work for himself. Now, half of his career is as a portfolio marketing director for a number of clients. The other half is talking to business clients about their pricing decisions. 

That will be David’s focus in his Vistage session – The Psychology of Pricing – on November 13th. We spoke to David ahead of the event (which you can register for here) to find out more. 

The most common pricing mistakes…

While pricing is one of the best ways to improve profits, it’s also one of the business areas that is most neglected, says David. 

“One of the key issues is businesses not understanding the value they are delivering”, he says. “One organisation I work with explained to me that they have a range of fees for different things – but these were defined years ago and haven’t changed since.”

Often, he says, it’s a “finger in the air” approach to setting prices, then simply increasing those prices to account for inflation each year. “However, this doesn’t take into account the value they are delivering and pricing against that value”, he explains. 

Others are worried that increasing their prices will mean they can’t compete. David cites the example of one business that came up with an innovative piece of technology 15 years ago, but soon found that competitors were entering the market with similar solutions. “They didn’t want to increase their prices because they feared that their customers would start to shop around”, he says. “As a result, their prices have remained static for 15 years.”

David also believes that discounting can be a big mistake. “Often, the people with the authority to discount don’t really understand the net margins within the business”, he clarifies. “They’ll understand the gross margins and believe they can knock 10% off the price with no problem. In fact, in doing so the business is only making 6% net margin on that particular item.”

How pricing differs between different markets

In regulated markets and commodity markets, making any real changes in pricing is near impossible. However, David explains that there are commonalities between other markets – whether it’s FMCG, professional services, construction or some other market entirely. 

“It doesn’t matter which market you’re in”, he stresses. “One of the most important things you need to do is to understand and be really clear about the value you’re delivering, and what differentiates you from the competition.” In every market, he continues, there is a range of prices: while some customers will always go for the cheapest, others will want to make a decision that is not just based on price, but also about quality or reducing risk. 

The second thing he stresses is that everyone is human. “While we’d like to think that we’re all immensely logical and rational, assessing the evidence in front of us to make decisions, in reality a lot of our decisions are emotional”, he explains – even at the very highest levels. Ignoring the psychology in pricing – the emotional element behind decision-making – can be a huge mistake. This psychological approach will be covered in David’s Vistage event. 

Who is the event targeted at? 

David’s event is designed to help any business that is not in a regulated or commodity market. As well as CEOs and board members, he recommends that senior sales and marketing executives can also benefit from the wisdom, tools and techniques that he will provide. 

“My aim is for every attendee to go away with at least one idea for something that they can try out with regards their pricing”, David says. He’ll be focusing on the psychological side of how we communicate prices – and based on previous webinars he’s run, he’s expecting plenty of lightbulb moments. 

The webinar will cover four different pricing concepts – not all of which will apply to every business – with the aim for attendees to pick out the one thing that they believe will really make an impact, testing it within their organisation. 
If you’ve ever struggled with increasing prices – or knowing what to charge for your products or services – this event is for you. Click here to find out more, and to register.

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