Pricing: How to set selling prices

You are convinced that market prices are given? We agree with you – and yet we will show you that you can influence your own sales prices within the framework of the given market prices.

Example: In a market for commodities, in this case sewer base pipes for the discharge of service water into the public sewer system, the market prices between manufacturers and specialist wholesalers are “given” and are under extreme pressure due to the comparability of the products and the overcapacity of the manufacturers. Manufacturers have to sell basic pipes at a loss; however, many are forced to continue playing the game because they need the capacity utilization. They have become dependent on others and depend on sales. Manufacturers who have only this product in their range have to produce it. Other manufacturers, who mainly offer profitable products, are expected by wholesalers to offer these unprofitable commodities as well.

And when I mentioned “game”, the wording was chosen deliberately. This game is not funny. But you can’t bury your head in the sand and take this game for granted. You can try to creatively change the game. That’s what two manufacturers have done despite the existing competition. How did they implement it? One manufacturer, who depends on the production of this commodity product, announced that it will no longer carry this product. He offers his capacity to the other manufacturer, who needs this product in his assortment, to produce the same commodity product for him with the competitor’s label. The buying competitor can cut back his production of this product and avoid the loss. The producing competitor pays more for the purchased product than can be achieved on the market. The two producers thus share the losses. There is another advantage: one supplier is eliminated from the market. This can stabilize prices. For the producing manufacturer, the purchase guarantee of his now only customer is important. He can now use the avoided losses to develop and launch higher-margin products in other markets. In this case, these were ventilation pipes. With this “new game”, which had to be created with competitive protection, it was possible to shape prices and margins in a commodity market despite “given” purchase prices.

Find “your” game and try to implement it in creative cooperation with third parties. Try out pricing strategies in pilot regions before rolling them out across your entire market.

Customers usually reward sustainable business activities with price premiums. Especially in phases when you are not getting paid enough for your services, it is also worthwhile on the surface thinking about sustainable management. A necessary precondition for pricing is the cost optimization.


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