Companies are facing a profound challenge – or opportunity. This is according to NBFSweden 2019 VIP speaker Marco Bertini, marketing professor and chair at the ESADE Business School in Barcelona. According to Marco, consumers in the last 10 years have exhibited specific buying decisions and patterns that cannot be ignored: they are rejecting the way may companies fundamentally approach making money.
The issue on the table is pricing. Marco explains that companies have traditionally treated value in the marketplace as a fixed pie and have reasoned that they must fight with their customers to appropriate as much of it as those customers will relinquish. What’s more, Marco outlines that firms have presumed that they are the rightful owners of value and are entitled to charge whatever the market will bear. To that end, they have treated pricing as an optimization problem, pricing mechanically in the pursuit of profit and routinely exploiting any consumer disadvantage, such as a lack of information or understanding, limited attention, or limited choice.
Marco counsels that businesses should look beyond the dry mechanics of “running the numbers” and recognize that humanizing the way they generate revenue can open up opportunities to create additional value. That means viewing customers as partners and working in collaboration to increase customer engagement and tap into insights about the value they seek and how firms could deliver it. The result is a bigger pie, which benefits firms and customers alike.
What does a shared-value approach to pricing look like? Watch Marco’s quick presentation that answers that question, or read the key points below.
Principles of creating shared value:
- Focus on relationships and see people as people not as wallets.
- Be proactive and get to know your customers’ behaviors, and use your pricing to target the behaviors you want your customers express.
- Be flexible – there’s no one size fits all when it comes to pricing.
- Be transparent, it builds trust and goodwill with your customers.
- Understand market standards for fairness.
The bottom line? Most firms rate poorly on at least one or more of these principles for shared-value pricing. If your company is among them, you can either treat your customers as partners in value creation and set prices accordingly or watch firms that do steal market share and profits.
This blog was adapted from Marco Bertini’s article in the HBR.
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