When mapping a market, it's important to study pricing strategy. This seems like an obvious comment. Of course, everyone understands that somewhere in the equation there's revenue, whether directly or indirectly.
I'm amazed, though, how often companies get it wrong and then are slow to react and change. Here are two examples.
1. Don't price where there is no value. We tried to buy some software recently that the vendor wanted to price on the basis of third party uses, a category of activity uncontrolled by us. In addition to an unlimited liability, the vendor wanted to charge the third party visitors a fee, which isn't standard in this business. It seemed like a universally bad idea. The vendor stuck to this model through beta and launch. People bought the software but grumbled about the pricing idea. Eventually, the vendor abandoned the pricing model when initial users started canceling subscriptions. Now that information was available right from day one. The customer comments were entirely negative. And now, the vendor has spent a lot of money communicating not just a product but a price. What will it cost to re-communicate? And how long will it take?
2. Price competitively by reducing costs. We have another company that has "a better mousetrap," a manufacturing technology device. The price for the current product in the market is about $750. Our fully loaded cost is coming out at about $65 (!). We can be in the market at $750 and be great -- and have lots of room to move if there is any need. Think of what leverage you lose if your cost of goods is OK but your expense structure adds hundreds of dollars to the fully loaded cost. Yet, companies add expenses every day without thinking about what those expense additions do to pricing flexibility.
Pricing strategy is a big topic. We communicate to customers and competitors by how we price, and it is not simple to change.