Observations on Pricing

Doug Hicks shares his observations from over five decades of working with small and mid-sized businesses on pricing strategies. Pricing remains a top 10 business topic, but many organizations still treat it simplistically, merely adding a markup to estimated costs. This often leads to unrealistic expectations and financial disappointments, as market conditions, not costs, determine the price. Many businesses also rely on outdated cost accounting systems that don't reflect true economic conditions, leading to flawed pricing decisions. By developing causality-based cost models, companies can more accurately assess costs and make strategic pricing decisions that optimize overall profitability. These models are particularly crucial for strategic pricing, enabling organizations to allocate fixed resources effectively and measure true value by considering investments. Furthermore, basing sales commissions on profitability or value added, rather than sales percentages, can prevent value erosion.

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