1. Jon R. Katz, Esq., MBA, JonRKatz@Gmail.com, http://JonRKatz.com, www.linkedin.com/in/JonRKatz
Strategic Pricing
Raising prices is the single most rapid method of increasing a company’s profitability. Sure, it comes
with potential downsides, such as weakening your competitive advantage in the marketplace or
alienating your customers, but if you can unify with your salespeople and emphasize your value
proposition, price increases may have little to no effect on sales volume. To illustrate this point, observe
the graph below:
A 1% improvement in price results in a 12.3% increase in profit
First, realize that the strongest resistance to price increases comes from inside the company. Salespeople
use price as a selling tool (as they should), but in doing so, they often move to the lowest price point
possible as a means of expediting negotiations and signing a customer as quickly as they can. This
practice may gain a customer, but that customer may not be a profitable one.
To cure this, use your salespeople not just as a way to expand your business, but also for their
negotiation skills. Limit their ability to offer deep discounts right off the bat and consider drafting their
contracts to offer progressive commission so that they earn a bulk of their wages by pressing for the best
deal. However, you must do more than this to keep up.
The faster that your company steps beyond its antiquated pricing policies, the faster it will be able to
adapt in the modern marketplace. This requires performing a competitive pricing analysis for each
product or service your company offers. Start with your highest-volume and highest-profit items and
chart your prices against your competitors’, noting the various discounts you each may offer (e.g., free
shipping charges, early payment discounts, volume discounts, warranty discounts, etc.). You can look to
salespeople, distributors, customers and anyone else involved to try to procure this information.

2. Jon R. Katz, Esq., MBA, JonRKatz@Gmail.com, http://JonRKatz.com, www.linkedin.com/in/JonRKatz
Critical in this exercise is to note the value proposition for each product or service relative to the
marketplace. While adjusting prices may appear to open the door for competitors to pilfer market share,
customers are wise enough to realize that they often get what they pay for. Rudimentarily, compare
Apple to Acer, or United to Spirit. To this point, I recently shared a meal with a pricing expert who said
the following:
“The most important part of pricing is coming up with your value proposition. You can use the best in
class skills to price a new product, capturing all of the differentiated value adds in your product and
pricing it accordingly. But if the field is not trained on the value that your product brings compared to
the competition, then your pricing strategy is dead in the water.”
So look to price increases as an easy way to generate cash, particularly in the face of financial woe. As
long as your company’s margins are in line with the industry norm, the customer will see that they’re
getting what they pay for, and you’ll be taking another step in the right direction.