Answer a yes or no to each of the 28 questions below, and then add up the number of “yes” answers to find out your pricing power score.
COMPANY
1. Do you know what your main pricing challenges are?
2. Are you clear on your desired price positioning?
3. Have you forecast your target prices in your business plan?
4. Have you grown your revenues and sales volumes in the past 12 months?
CUSTOMERS
5. Do you know the acceptable range of prices your customers are willing to pay?
6. Do you know by how much you could increase your prices without it negatively affecting sales levels?
7. Do you know how to segment your customers by different price levels?
8. Have you ever asked your customers what prices they might be willing to pay?
COMPETITORS
9. Do you know the price points of your main competitors?
10. Do you know how to justify your prices versus a competitor?
11. Are you able to acquire new customers reasonably easily?
12. Are you able to avoid giving away unnecessary discounts to win new business?
PRODUCTS & SERVICES
13. Do you have a clear specification of what’s included in your product (or service) offering?
14. Have you asked your customers which are the most important features of your product or service?
15. Do you know the unit cost for each of your main products (or services)?
16. Have you clearly defined the value your customers get from your products and services?
PRICING
17. Do you have a history of implementing price increases on a regular basis?
18. Do you have good controls on how your prices are calculated and approved?
19. Do you use at least three different pricing strategies?
20. Do you have a wide range of different price points in your product range?
PROPOSITION
21. Do you have a clear value proposition that communicates the benefits of your offering?
22. Do you know how to apply psychological pricing tactics (e.g. price anchors, decoy prices, price thresholds)?
23. Do you have a clearly defined discounting policy?
24. Have you optimised the presentation of your prices (e.g., in proposals, documents, slides, websites)?
PROFITS
25. Is your business as profitable as you would like it to be?
26. Do you have a written pricing policy that is trained out to all staff who need to explain your prices?
27. Do you and your team have full confidence in your pricing?
28. Do you know what difference a 5 per cent increase in your prices would have on your net profits?
Your pricing power:
Strong – if you scored 21-28 (more than 75 per cent), you have strong pricing power. Congratulations! Very few companies are genuinely at this level.
Moderate – if you scored 14-20 (more than 50 per cent), you have adequate pricing power. Well done. Although there’s still room for improvement in some areas, you’re doing many things well and have the foundations you need to achieve strong pricing power.
Poor – if you scored 7-13 (more than 25 per cent), you have poor pricing power. There are a significant number of areas of your business where you aren’t clear on your strategy, which results in poor pricing power. But don’t worry! By focusing on those areas where you scored lowest, you can make a big improvement fairly quickly.
Weak – if you scored 0-6 (less than 25 per cent), then you have weak pricing power. There are serious issues with many parts of your business and how they impact your pricing power. Your business is probably struggling and may be at risk of long-term decline. You need to take urgent action to address the issues highlighted by your survey results if you’re going to thrive in the longer term.
(For an online version of this scorecard, please click here. You will also receive a summary report which gives you hints and tips as to what you can do to improve your pricing power.)
I hope that is a useful exercise and gives you some insight into what you could do to improve your pricing.