April 6, 2012
A lot of the companies we work with talk about their desire to get away from cost plus pricing and move to value pricing. But many companies have no idea how to get from one to another. They hope that value price means price higher. This may be the case in some instances of course, but the opposite could be true as well. Remember, customers don’t care about your fixed costs, or variable costs, or efficiencies or lack thereof, or features they don’t need, or your shipping lane rates or your good (or bad!) hedging of raw materials. They care about getting the right product for the best price they can where and when they need it.
If you can do that better than your competitors THEN you are delivering value. But do this you have to be organized around this. You need executives who preach this, and salespeople who understand this, and pricing teams with the skills to analyze this, and product teams who live this. There’s no easy button.
– Dan Bormolini