How to be Precise in Pricing

When we talk about successful marketing strategies, price management often sits in the background, rarely discussed with the intensity it deserves. Yet pricing is arguably the most powerful and immediate lever in the marketer’s toolkit. Set it too high, and customers walk away. Set it too low, and you erode profitability and limit your ability to reinvest in growth. Despite this, pricing tends to receive significantly less attention than other marketing activities. It's time to change that.

Rethinking the Pricing Paradigm: From Mark-Up to Value

A lot of companies still rely on a traditional “mark-up pricing” approach - calculating costs and adding a margin. While simple, this model overlooks one crucial factor: the customer.

A more effective approach is value-based pricing. This strategy starts with the customer’s willingness to pay and then works backwards. By aligning prices with what the market is actually prepared to pay, companies can maximise both competitiveness and profitability, and understand the value of their brand and products. In short, it's pricing that respects both the buyer and the business.

Why Pricing Deserves More Strategic Attention

Price has the power to deliver instant impact. Yet, because pricing can feel complex and technical, many marketers avoid diving into it.

But complexity shouldn't deter you when it comes to pricing decisions, and it should have a seat at the table. Indeed, with the right mindset and tools, pricing can become a strategic advantage. The key lies in knowing what you want pricing to achieve.

Defining the Objective: Know Your Destination

Seneca once said, “If a man knows not to which port he sails, no wind is favourable.” This applies perfectly to pricing. Without a clear objective, any pricing is bound to fall short.

So, what can pricing help you achieve?

• Reposition your brand in the market.

• Maximise revenue or profit, depending on business goals.

• Challenge competitors by leveraging pricing as a strategic weapon.

Once your objective is clear, you can determine the right pricing levers to pull.

Strategic and Tactical Pricing Actions to Consider

Achieving your pricing goal requires a set of coordinated actions. Here are some proven ways to fine-tune pricing across multiple dimensions:

• Brand- of Product Differentiated Pricing: Customise prices based on segment-specific preferences or brand loyalty.

• Channel-Differentiated Pricing: Adjust prices across different sales channels by leveraging consumer behaviour and transaction dynamics.

• Product and Bundle Optimisation: Create strategic price gaps between variants and use bundling (e.g., core product + optional extras) to enhance perceived value.

• Promotional Pricing: Use discounts, rebates, or limited-time offers to drive short-term volume.

• Communication and Psychology: Frame prices using behavioural economics to enhance perceived value and reduce friction.

All of these require market understanding - knowing how different customer types perceive value and respond to pricing. Tailoring your strategy to the market turns pricing from a blunt instrument into a precision tool.

Gathering the Right Data: Smart Survey Design

Good pricing decisions are built on robust data. When conducting primary research, a well-structured survey can capture valuable insights into how people make purchasing decisions. Here's what to prioritise:

1. Replicate the Informational Journey: Provide product information in ways that mirror real-life shopping behaviour.

2. Simulate Real Purchase Scenarios: Use split-sample experiments that test cornerstone price points and variations in product offerings.

3. Capture Trade-Offs: Use techniques like Conjoint Analysis to model how people choose among different price–value combinations.

   
   

By mimicking real-world conditions, well-designed surveys provide accurate and actionable insights. Adding trade-off techniques provides insights into what customers value most and helps quantify the value of a brand. The combination of both allows the strengths of each to come through.

Modelling Price-Sensitivity: Techniques That Work

Once the data is collected, modelling helps convert survey responses into usable pricing recommendations. These are the most effective techniques:

• Historical Calibration: Use past sales data to validate your model, ensuring it mirrors real-world performance.

• Purchase Intent Anchoring: Apply standardised purchase-intent measures and validated models to estimate in-market shares.

• Behavioural Adjustment Factors: For habitual categories, include behavioural barriers to change in your models to fine-tune forecasts.

  
  

These methods yield reliable outputs and increase confidence in pricing decisions.

Interpreting Results: What You'll Get and How to Use it

At the most basic level, pricing studies produce price–demand curves or price elasticity metrics – essential tools for determining optimal price points for maximum revenue or profit.

More advanced approaches include:

• Scenario Simulators: These tools help model different pricing strategies, including potential competitor reactions.

• Game-Theoretical Insights: Understand how markets evolve under different pricing strategies using simulations rooted in strategic theory.

• Supportive Diagnostics: Survey-based diagnostics enhance internal credibility, making it easier to communicate and justify pricing decisions within your organisation.

Final Thoughts: Make Pricing a Strategic Priority

Despite its complexity, pricing decisions should be embraced, not avoided. It’s too powerful a lever to leave on autopilot. With a clear strategy, smart research, and thoughtful modelling, pricing can drive both growth and profitability.

In the end, getting pricing right is not just about numbers. It's about understanding your market, your customer, and your value. And that makes it one of the most strategic decisions you can make.

Get in Touch

Martin Hellich

martin.hellich@dvj-insights.com

Martin has nearly 25 years of experience in professional services, helping clients achieve commercial success through cutting-edge innovation solutions. A passionate advocate for advancing innovation research, Martin regularly shares his expertise through publications and industry events.