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The Three Lenses of Pricing

Many companies evaluate pricing decisions through just one or two lenses. The value of our approach comes from using all three lenses every time—paying special attention to the areas of overlap.

When companies apply a three-lens perspective to their pricing decisions, they gain a complete view of their opportunities. They can then ensure that when pricing moves are made, they aren’t “leaving money on the table.”

Customer Value

Companies often overestimate customer sensitivity—and thus oversimplify pricing structures. When looking through the customer lens, ask: Who are each of my target segments, and what are they willing to pay for my product?

Economics

Each organization has its own unique set of economic considerations that influence each purchase decision. When it comes to this lens, evaluate specific metrics, such as marginal cost, attach rates, margin waterfalls, and price realization.


Competition

In competitive pricing situations, the risk of price wars and commoditization can be significant. Applying the competition lens, ask: Who are the competitors that offer alternatives? What is the value of their product versus ours, and how have they priced their products over time?

Price Elasticity

By comparing customer value with your business’s own economic figures, you can use our price elasticity tools to easily determine the relationship between supply and demand as well as price sensitivity.


Game Theory

By comparing your own economic factors with those of the competition, you can begin to simulate real-world scenarios and use war-game tools to develop relevant pricing strategies.

Price Discrimination

By comparing customer segments to your competitor’s pricing strategies, you can get a better understanding of different tactics used to set price points for each of your customer segments.


Value Extraction

The greatest value comes from the combination of all three lenses—bringing together customer insights with a deep competitive analysis and evaluation of your own economic factors.

At little cost or risk, companies can create short-term revenue growth that simultaneously funds long-term profit as well as the development of new strategic capabilities.

Excerpt from A Growth Zealot’s Guide to Transformation

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