How the High-Fliers Price
Are the rich really different from you and me? A recent survey by Coopers & Lybrand shows how the fastest-growing companies set their prices. The results of the survey -- of 424 product and service companies with sales of $1 million to $50 million -- are instructive:
1. Price monitoring and adjustment are continual. Companies that either increased or decreased prices in 1994 fared better than those that took no action. The price changers reported 28% revenue growth, nearly 8% higher than the fixed pricers.
2. Few companies consult potential purchasers as part of their price-setting process. A puny 12% conduct end-user studies. A full 65% rely on "perceived value or worth to the customer." Companies are just as likely to base prices on the competition's (58%) as on the "uniqueness of product or service" (51%). And 43% still use the cost-plus approach.
3. CEOs depend on several managers for pricing input: namely, those from finance (38%), marketing (36%), and sales (23%).* * *