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The price is right? Guidelines for pricing to enhance profitability

Author

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  • Kohli, Chiranjeev
  • Suri, Rajneesh

Abstract

Pricing is a key element of the marketing strategy. It does not require significant investments or resources, and is perhaps the most accessible lever to manage profitability. Even minor fluctuations in pricing can have a significant impact on both revenues and profitability. As such, lack of careful planning in pricing is a wasted opportunity. With this as a backdrop, we make a case for precision in pricing to enhance profitability. Since consumers vary in their preferences, motivations, and propensity to spend, they assign varying degrees of emphasis regarding price upon their purchase decisions. We argue that pricing is a creative exercise in math and behavioral economics, and companies should stay focused on profits. We also provide a series of guidelines for creating effective base prices, and then modifying them to enhance profitability. Finally, monitoring prices at the transaction level will reduce leakage in profits and further add to the bottom line.

Suggested Citation

  • Kohli, Chiranjeev & Suri, Rajneesh, 2011. "The price is right? Guidelines for pricing to enhance profitability," Business Horizons, Elsevier, vol. 54(6), pages 563-573.
    • Handle: RePEc:eee:bushor:v:54:y:2011:i:6:p:563-573
    DOI: 10.1016/j.bushor.2011.08.001
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    Citations

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    Cited by:

    1. Pawe{l} Fiedor, 2013. "Frequency Effects on Predictability of Stock Returns," Papers 1310.5540, arXiv.org, revised Nov 2013.
    2. Liozu, Stephan & Hinterhuber, Andreas, 2022. "Pricing as a driver of profitable growth: An agenda for CEOs and senior executives," Business Horizons, Elsevier, vol. 65(4), pages 457-467.
    3. Chul-Yong Lee & Sung-Yoon Huh, 2017. "Technology Forecasting Using a Diffusion Model Incorporating Replacement Purchases," Sustainability, MDPI, vol. 9(6), pages 1-14, June.
    4. Sihem Dekhili & Mohamed Akli Achabou, 2013. "Price Fairness in the Case of Green Products: Enterprises' Policies and Consumers' Perceptions," Business Strategy and the Environment, Wiley Blackwell, vol. 22(8), pages 547-560, December.

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