Pricing Done Right: A book review by Bob Morris

Posted on: September 6th, 2016 by bobmorris

Pricing Done RightPricing Done Right: The Pricing Framework Proven Successful by the World’s Most Profitable Companies
Tim J. Smith
Bloomberg Financial (July 2016)

How the Value-Based Pricing Framework can help almost any organization to establish and strengthen its competitive advantage

Leaders in many organizations are now frustrated by their struggles with price setting, reporting, and variance challenge and are in urgent need of “a predictable and reliable price management system.” Tim Smith has written this book for them. In it, he provides an abundance of information insights, and counsel that will enable to establish and then strengthen such a system.

In my opinion, Smith has done for pricing what Ben Graham and then Warren Buffett have done for investing. There are several parallels between the mindsets they formulated. My guess (only a guess) is that Graham and Buffett value very highly the companies whose leaders embrace that framework and pursue strategies that will have high-impact in a global marketplace that seems to become more volatile, more uncertain, more complex, and more ambiguous each day.

These are among the dozens of passages of greatest interest and value to me, also listed to suggest the scope of Smith’s coverage:

o Overarching Pricing Decision Areas (Pages 3-7)
o Decision Teams (8-9)
o The Purpose of Firms: Serve Customer Needs Profitably (11-15)
o Value Engineering (15-17)
o Value-Based Pricing (17-20)
o Differential Benefits (20-26)
o Business Strategy (36-39)
o Competitors (47-51)
o Price Positioning (56-62)
o Price Segmentation 62-65)
o Competitive with and Without (70-73)
o Pricing Capability (74-76)
o Market Pricing (82-86)
o Price Execution 92-95)
o Pricing Analysis (95-97)
o Continuous Improvement Process (120-122)
o Offering Innovation and Pricing Decisions (123-131)
o Market Pricing Continuous Improvement (135-137)
o Pricing Reporting Structure (143-145)

Those who are among the leaders in organizations that are now frustrated by their struggles with price setting, reporting, and variance challenge and are in urgent need of “a predictable and reliable price management system,” the Value-Based Pricing Framework is eminently worthy of careful consideration because can identify pricing decision points across the organizational life cycle and the offering life cycle. “It also identifies pricing decisions and actions that cross departments.”

I agree with Tim Smith that consideration of this framework starts with an executive decision: “Where am I today and where do I want to be tomorrow?” It is immensely important to keep in mind that the framework does not address pricing issues; rather, it addresses business issues that have profound implications and consequences throughout the given enterprise.

That point is so important that I repeat it: the framework does not address pricing issues; rather, it addresses business issues that have profound implications and consequences throughout the given enterprise.

Here are Smith’s final thoughts: “Using this Value-Based Pricing Framework is a choice. It’s a decision. An opportunity. You can squander the value you create and deliver to the market or capture it and use it to create more value in the market. Making better pricing decisions is a choice.”

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One Response

  1. Doug Macmillan says:

    I believe this will be an important book to read and ‘inwardly digest.’

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