Pricing For Profit

Pricing For Profit

Few businesses are compensated well for the value they provide.

Many small business owners are trapped by industry pricing and market misconceptions, when they could be compensated for the true value of the product or service being offered. The low price they feel compelled to offer limits their ability to generate profits which, in turn, slows their response to changing customer needs.

The good news is that a business can command almost any price it chooses by focusing on the value-not the cost-to the customer. Pricing for Profit shows businesspeople how to break out of the stranglehold of industry pricing and charge more for their wares (regardless of the competition) without alienating their customers.

Readers will learn how to:
Quantify the value of their products or services
Distinguish between price buyers and value buyers
Bundle their offerings for competitive advantage and increased customer value
Craft a powerful marketing message that communicates value
Generate more unit sales and close more sales overall, at higher prices
Make more money with less effort

Filled with easy-to-use formulas, sample scripts, clear examples, instructive exercises, and more, this accessible and practical guide is a must-read for businesspeople who want to be well-paid for the value they provide.

Dale Furtwengler is President of Furtwengler & Associates, P.C., a consulting firm dedicated to helping small businesses increase profits without adding resources.

Pricing For Profit
McGraw-Hill Education Australia & New Zealand
Author: Dale Furtwengler
ISBN: 9780814415177
Price: $24.95

Interview with Dale Furtwengler

Question: Why did you believe businesses needed Pricing For Profit?

Dale Furtwengler: In my consulting work as a part-time CFO, I consistently found that business owners didn't really know which of their products/services were making money and which weren't. Their accounting systems simply weren't set up to provide that information. When I analysed the profitability of their various offerings I, inevitably, found that their greatest investment in marketing dollars and production capacity were all in their least profitable lines. When I made them aware of that fact, they'd say "That's our primary business. Can we raise prices?" And I show them how to do that.


Question: How will Pricing For Profit help small business, worldwide?

Dale Furtwengler: I've been around a long time and one of the things I've learned is that there is a commonality to our humanity that transcends culture and geography. The concepts in pricing for profit identifies and clarifies those aspects of commonality and shows business leaders how to use that knowledge to identify their ideal customers, what it is they value and how much they value it (the price they're willing to pay). The more effectively that business owners around the world get at identifying their ideal customers and pricing their products accordingly, the easier it becomes for buyers to make informed decisions which, in turn, leads to more effective use of resources around the world.


Question: How did your career contribute to the research for Pricing For Profit?

Dale Furtwengler: It's through the work described in answer #1 that I began to notice the most common mistakes that business leaders were making in their pricing. In helping clients avoid those mistakes I discovered that there are really on three things that any business sells, that the real source of value lies in just three things - image, innovation and time savings (convenience). Any benefit that any company claims to provide will fit into one of those three categories. That realisation made it much easier to research the marketplace to see what premiums buyers were willing to pay for each of those value propositions. I've been told that I'm a behavioralist at heart and that's probably true. I observe peoples' behaviors to get a sense for what's important to them and how much they're willing to pay to get what's important to them. I find that behaviors offer the best evidence of a person's value system.


Question: How can small business quantify the value of their products or services?

Dale Furtwengler: There are two approaches for quantifying value. The first, the one used most often in business-to-business sales, is calculating the financial impact (profitability or cash flow, whichever yields the higher return) that the product or service will have on the customers' business. If my offering enhances their image and it allows them to get higher prices from image-conscious buyers, I can multiply the price increase by the units sold to get a sense for the value I'm providing. If I'm selling innovation, then I'm solving a problem that has existed for some time and I can calculate the costs associated for the customer experiencing that problem to arrive at the value. If I save a company time (increase productivity), they're going to use that time to generate additional sales. The gross margin on those sales (plus any price increase they can justify) is an honest measure of value for that customer. The second approach is relational pricing - looking at what companies in non-competing businesses, that are serving the same markets you're targeting - are getting for their products and services to see what buyers are willing to pay for those services, then comparing that price to the lowest priced alternative in that industry to see what premiums buyers in your market are paying. If I'm a chocolatier wanting to serve the middle market - good, unbranded or little known brand quality at an affordable price - I could use retail department stores and see that JCPenney's is also serving this middle market. Historically a sweater at JCPenney's would be around $30 to $50 dollars depending upon the brand. A sweater at Walmart would be about $10. That tells me, as a chocolatier, that I could get 3 to 5 times the lowest-priced chocolate for my product, depending on how much I want to spend branding it.


Question: Why was it important that you included easy-to-use formulas and clear examples?

Dale Furtwengler: Einstein said "Any intelligent fool can make things bigger and more complex... It takes a touch of genius - and a lot of courage to move in the opposite direction." The more complex things are the less likely people are to implement them. By offering simple examples from everyday life I accomplish several things. First, the reader validates my point with their personal experiences. This validation gives the idea (concept) instant credibility. Second, the simplicity makes it easer for them to employ. Finally, the combination of validation and simplicity allows sellers to get compensated well for the value they provide while helping buyers make informed decisions. This leads to a more effective utilisation of resources, as mentioned above.


Interview by Brooke Hunter