Keys to Setting Prices

The ten fundamental points to consider when defining a company's pricing policy, and actions to take to determination them.

Wednesday, March 4, 2015

By Ariel Baños
President and founder of

1. I will use the cost discover the floor price and profitability, never to set the price.

2. When a customer questions my price, before offering a discount or letting them go, I will make sure that they understand the differential value of my proposal.

3. If my proposal does not have a differential value for the main competitors, I will think of ways to innovate to differentiate myself.

4. I will apply prices to suit every customer, without alienating anyone using segmentation tools based on value prices.

5. I will reward vendors that provide higher returns, not just volume.

6. I will analyze smart ways to communicate the price: how it is transmitted is as important as the price itself.

7. I will define clear rules to preserve profitability in the sales channel: what the suggested prices and discounts are, and will control them permanently.

8. I will analyze in advance the impact of giving a discount or doing a promotion.

9. I will compare my prices only to those competitors that target the same customer segment.

10. I will not rely only on intuition: I will use a professional methodology for setting prices (Yes it does exist!).

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The last weeks of December are generally a good time to evaluate the results of the strategy implemented throughout the year that is ending, and to reevaluate plans for next year. Ariel Baños, a specialist in price management, recommends that companies commit to five principles in order to get the information needed to decide on plans for next year.

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