The most critical strategic decision a company can make is how to price its products or services. Not only does pricing affect profitability more than any other factor an executive can control, it's also among the easiest strategies to implement.

For a typical U.S. company, a 1-percent increase in price generates a 12-percent increase in operating profit. By comparison, increasing sales by 1 percent raises operating profit by just 4 percent, and reducing overhead by 1 percent improves operating profit by only 2.6 percent.

You can develop the right pricing strategy only by integrating multiple perspectives. Strategic Advantage helps you formulate pricing strategy by integrating internal costs, customer value, and competitors' pricing strategies. Setting price based on only one of these factors, as is typically the case, will not boost your profitability.

• What is the value of your product or service to customers? Why do they buy from you? What are they buying?
• How does value to the customer differ across various market segments? How can you attract new customer segments? How can you attract more of the customer segments that place the highest value on what you offer?
• How price-sensitive are customers? How available are alternatives?
• What factors influence customers' sensitivity to price?
• How do you set the price for new products? How do you determine customer value for new products/services?

• Who are your current and future competitors?
• What do your competitors charge for comparable products/services?
• What are their pricing strategies?
• What are their cost structures?
• How are they likely to respond if you raise or reduce prices?
• What customer segments do your competitors target?

• What are the price, volume, and profit trade-off for your company?
• What are the variable and fixed costs for your products or services?
• At what level would you incur additional fixed costs?

Use our Pricing for Profit Calculator to see how much money you might be leaving on the table. Then call 480-759-7562 or e-mail us at information@strategy4u.com to learn how we can help you generate new profits by developing the right pricing strategy for your company.