The sales price management is one of the nerve centers of any company.
The pressure is constant. On one side are its shareholders, directors, and controllers, demanding revenue and profitability targets; on the other, its customers, distributors, and even its salespeople, asking for more affordable prices.
Not to mention its competitors, who are always ready to grab a part of its market, and the constituted authorities, changing the rules and the ongoing macroeconomic variables.
In pricing, that challenge can be summarized as follows:
Observe that there exists a floor (minimum) price and a ceiling (maximum) price. Prices lower than the floor are devalued and cause the offerer to lose money. Prices higher than the ceiling are exaggerated pricing, which causes him to lose sales and ultimately exclude the product or service from the market.
Between these two limits—floor and ceiling values—are the prices acceptable to the customer and generate some profit for the offerer.
Beyond that, the price charged depends on the level of demand and the degree of differentiation of the sale object. That is, the greater its demand, the higher the price; the more its differentiation in value perceived by the customer, the higher the price possible too. And vice versa.
That is the game. The price manager, browsing between those extremes and subject to all kinds of pressures, manipulates market variables to achieve the best price and the highest sales volume.
Some marketing variables, such as the consumer market, competition, and business environment, are uncontrollable. There is very little the price manager can do about them. Others, internal variables, such as the product mix, the sales team, and the promotional effort, are controllable. In short, pricing success depends on the manager’s skill in adapting and negotiating his offers, both inside and outside the company.
At first, it seems simple. But, as a matter of fact, it is not easy at all.
C. L. Eckhard, author of Pricing in Agribusiness: setting and managing prices for better sales margins.
Claudio Luiz Eckhard is a former professor, business consultant, and author of the books “Ajustando o Rumo”[Adjusting the Business Course], “Gestão pela Margem”[Management by Margin], “A Empresa Saudável”[The Healthy Company], and “Pricing no Agribusiness”[Pricing in Agribusiness].
