About Best Practice Pricing

In today's economic environment companies must make every possible effort to retain and if at all possible, increase, their profits. Instituting good pricing practices is one of the most powerful ways to combat the rising costs of energy, transport raw materials, just to name a few. Yet, only a small number of companies seem to care at all about best practice pricing, resorting to erroneous methods they are familiar with, like "gut feel", "market price" or "cost plus". Why? Well, because cost cutting has been the mantra of business for the last 30 years or more, and most companies don't really know what best practice pricing means.

Wednesday, March 24, 2010

Taking control of your own pricing

One of the aspects of best practice pricing is to take control over what customers are willing to pay. Just today I found another example of this. General Mills, the food giant reported strong earnings growth. Here are some interesting numbers:

Revenue for its US retail business increased 9.1% while sales volume “only” increased with 3%. Thus, the company was able to increase prices, and/or direct consumers to more expensive products.

General Mill’s CEO Ken Powell said in the press release that they made a significant marketing reinvestment and will continue to do so. Thus - General Mills took control and influenced the marketplace, with marketing, to pay higher prices. A great example of what just about every company can elect to do - even when selling commodities like General Mills.

With best cereal regards,

Per Sjofors
Atenga Inc
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1 comment:

Unknown said...

That's really impressive performance in a tough category. Thanks for bringing it to my attention. I'd be interested to know whether they were catching up after years of poor pricing or whether this is standard practice. Either way, it's great to see them pull the pricing lever.

March 24, 2010 at 11:13 AM

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