The recipient of the prestigious award for the Marketing Book of the Year 2019 is alumnus Felix Mörée (with co-authors Hermann Simon and Andreas Jonason), who wrote the book Get paid – Why price is everything (Ta betalt – Hur pris påverkar allt). All three authors work with commercial strategy on a daily basis at Simon-Kucher & Partners.
As pricing is currently very topical, Felix Mörée believes this is one of the reasons that this particular book was awarded the prize. According to the jury, the book is written with a practical approach that combines theory with concrete examples. Mörée says that it is possibly pricing in particular that is the most forgotten leveraging tool for profitable business and that pricing has the largest and, in most cases, the fastest impact on a company’s profits.
“Companies increasingly understand that they can boost their profit significantly through smart pricing. Digitisation also plays an important role here, as cost-based pricing that companies have traditionally used no longer works. Digital products have a near-zero marginal cost and companies therefore need to apply value-based pricing.”
Another aspect that companies have understood is that cost savings can take months or years to implement, while in many cases price changes can be implemented directly, he explains.
“Many people believe that prices are set according to some kind of natural law. However, it is possible for companies to have much more of an impact on prices and clients’ willingness to pay than they may believe. There are many dimensions to consider when setting prices – from price positioning to psychological factors.”
Felix Mörée’s 4 best tips on how to succeed with pricing as a business owner
1. Price = value.
In Latin, the word for price is the same as the word for value – remember that, and repeat it daily. A good and basic guiding principle for price setting is to remember that the price should reflect the value. It sounds obvious, but far too many companies fail in this respect.
2. Differentiate more.
Your clients are not the same, so your offers should not be the same. Make sure you adapt offers and prices according to client needs.
3. Make pricing a part of the company’s DNA.
Pricing should be a central part of product development – if you think about the price at an early stage it is more likely you that you will develop a product or service that clients actually want to pay for.
4. Choose a pricing model that communicates value.
Ensure that the pricing model and metrics reflect the value you get from the product. On our recommendation, a crane company changed their price metrics from price per crane to price per crane load because it was the crane load that created value for the crane company’s clients. Given that it is possible to measure more today, it is possible to be very innovative here – think beyond metrics based on price per hour or price per licence in favour of price per use and actual value creation.
Text: Helga Heun