By Bob Clark
June 17, 2010
Pricing for Profit: How to Command Higher Prices for Your Products and Services
By Dale Furtwengler
AMACOM, New York, NY
October 2009, 240 pages, $24.95
Developing the correct pricing strategy for a product or service will determine profitability, and may determine if the business survives. In a turbulent economy, many leaders respond by cutting prices to sustain volumes.
For long-term business success this may be the wrong thing to do. The damage to customer perceptions about the business and its products can be significant.
Dale Furtwengler’s new book is designed to help smaller businesses avoid the trap of becoming just another commodity – unable to attract a reliable customer base or build a strong profit history.
Every business leader has heard – and maybe said – “I can’t raise prices because:”
• Our name isn’t well known enough to command a higher price.
• Our customers only buy based on price.
• Our industry is so competitive that none of the players can raise prices.
• Our market share and volume will drop if we raise prices.
In Furtwengler’s view, none of these reasons are valid if you have properly identified your core customers and adequately communicated the value of your offerings.
The first step is attracting the right customers. To do that, you must understand those who purchase your product or service very well. Building the knowledge base will require a variety of surveys and a solid information collection system from your sales force. The information gathered needs to focus on what value you add for the customer and how best to develop messages that communicate the potential to add value for each customer.
There will always be a need to change your products and services. As the author suggests, changes can be driven by customer preferences, shifts in competitor offerings, technological upgrades, or internally developed and designed improvements.
Furtwengler suggests that regardless of what is driving change, the effective business leader will develop a leadership team or board of directors (or their equivalent) that can assess the need for change and review any response to identified needs. The change cannot be for its own sake, but must deliver value for customers that warrant improved pricing and profits.
This book is a readable and well-organized tool for building a pricing strategy. The author has loaded it with solid examples of both problems and solutions to the pricing dilemma. Any business leader struggling with a pricing problem and profit squeeze can benefit from spending time with this book.
A strong endorsement of Furtwengler’s principles can be found in a recent Wall Street Journal article. Entitled “Raise Your Prices!”, the article was authored by Frank V. Cespedes, Elliot B. Ross, and Benson P. Shapiro. It appeared in the Mon., May 24, 2010, edition of the WSJ. While developed independently, the article is focused on sending a clear value message to the customer and pricing accordingly.
Bob Clark is the president of RWC Consulting LLC and has more than 30 years’ experience in labor-management relations. He provides consulting help in labor relations and is an adjunct professor at Concordia University in Ann Arbor.