Various trends and conditions can serve as signs that pricing problems may exist and should be both recognized and rectified.
While such conditions can vary among industries and companies, here is a partial list of factors that can signal that significant pricing problems exist or are impending:
- gross margins are (unexpectedly) declining
- opportunities for profitable growth aren’t apparent
- existing product (or service) sales are less than expected
- new product (or service) sales are less than expected
- new product profitability is less than expected
- competitors are successfully entering the market at lower pricing points (undercutting price)
- loss of market share (especially if unexpected)
- price discounts don’t yield (expected) gains in sales and/or market share
- price increases don’t yield expected increases in profitability
- unexpected changes in price elasticity
While the above list is only a partial representation of factors that may indicate pricing problems, it does illustrate the potential range of problematical business issues that may involve pricing.
The causes of these various pricing problems are numerous and can be complex. As well, the pricing problems may involve other issues, such as those involving product or changing overall demand. The correct diagnosis of such potential pricing problems is imperative if one hopes to apply the proper and optimal remedy.
The above factors can serve as “early warnings” of pricing problems. If they are quickly and properly addressed, one can not only avoid protracted pricing and business problems, but even turn what would be a (highly) problematical situation into one that can have a (highly) positive outcome.