In today's episode of Pricing College - Aidan and Joanna ask that seemingly easy question - what actually is pricing? And it is not as straightforward as you may expect.

What is pricing?

A way to charge for the products and services that you sell to customers.

Can it be done badly - and can it be done well?

What is difference in a good or bad pricing approach.

Many companies and company leaders do not know what pricing is or where it sits.

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Hello and welcome to Pricing College with your host Aidan Campbell and Joanna Wells. In today's episode, we want to cover the very fundamental question “What is the pricing?” 

What is Pricing? We hear that quite a bit. Pricing to me is a process, a price-setting process to set your customer invoice prices to generate value for the business and your customers 

I often think of a very simple way of looking at it, pricing is charging your customers for the product or services that you provide. Simply getting the dollars in after doing all the hard work.

Some people maybe don’t put the hard work into pricing thinking that they don’t have to, there’s a lot of guesswork that happens around pricing, other companies have a little bit more of a sophisticated approach to pricing thinking about their cost and then maybe adding applying a markup and then there are those few companies that think about pricing in terms of the market, customers, changes in the market and economic market conditions and this is when you’ll see the pricing process getting more complicated and really exciting. 

I think that’s right, we certainly at least, I haven’t worked in a number of companies. I think we see all different spectrums from companies who have no pricing approach or function, up to the very advanced companies and obviously with that when you apply expertise to anything you will expect to see better results and, in pricing and business better results translated to more dollars 

The good thing about pricing is that you don’t have to be an expert to do some good things and see improvements. You can do some small basic improvements to your pricing process and see some great results too. But obviously, it’s always good to have somebody in the business with a bit more expertise to educate the business on what pricing is and could be for the business, small steps and this is what pricing is about, learning. 

One thing I find interesting is that in many companies people do not know what pricing is, they don’t know where pricing is set in the business and secondly, they’re not even aware at least consciously aware that pricing is a separate function 

That’s right. It’s almost like they just think pricing just appears, it’s just a new set of numbers that have just appeared out of nowhere and the process in producing those numbers would’ve ever looked it’s just happened and it’s little ignored but there’s a whole discipline around pricing and people that are dedicated to improving the pricing process.

It’s like the other one was saying, I don’t know who was it from actually but if you can’t measure it; you can’t improve it. In many companies, there’s just no dedication whether a dedicated function or dedicated time to pricing and hence because of that we get certainly suboptimal outcomes 

We have those suboptimal outcomes that tend to be based on people that are guessing because they don’t have the support, tools, and mechanisms to just give them that edge on pricing. Because maybe they want to guess which prices are right that’s kind of a scary thing. You want your pricing to be right, you want to generate value for the business. Some people just don’t have the tools and the skills and knowledge to do so. Asking the question of what is pricing is a great way just to reveal what it is. There’s a whole support mechanism out there for people and businesses and teams so they can be improved and get better at pricing. 

I think one of the reasons behind this podcast from our perspective is often people in companies have to explain to senior leaders, senior stakeholders what their job is and what pricing does. I think the first time most people hear pricing is the classic four P’s of marketing and I can’t even remember what those classic four P’s are but in recent years pricing is moved away from being a subset of marketing to being a real stand-alone value-driven, value delivering and sector in any company. 

Yeah, that’s the whole discipline just dedicated to pricing and when we say pricing is not just the price, it could be a product mix, it’s revenue management, it’s discounting, tactical pricing, strategic pricing thinking about market pricing. It’s not just moving a price up-and-down in a spreadsheet, it’s thinking about value and what does that price represent to customers how do customers buy from us, and this is where pricing becomes really interesting and moves away from just that pure accountancy-driven cost-plus pricing.

I think we’ll leave it there today I hope what we’ve done gave a good introduction and hopefully readied your appetite for future episodes.