How do you measure success?
Measuring pricing success is challenging. Using measures like volume sales growth and market share gains may demonstrate that prices are right . . . or that they are too low, leaving money on the table. Measuring improvement in margin or contribution could mean that prices are right . . . or that they are too high, failing to make profitable sales available in the market. So what is the correct measure?
In theory, the true determinant of pricing success is the small size of the sum of money left on the table. The perfect price captures just less than the full value provided to the customer, leaving a small bonus or ‘customer surplus’ such that they feel they have made a beneficial transaction. It is part economics, ...
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