As a CFO, you need to understand all the risks and opportunities associated with pricing. After all, pricing is a strategic issue that can have a huge impact on your company's profitability. In this article, we'll discuss some of the key questions you should be asking when it comes to pricing.
1. Which data points should I use as KPIs?
As a CFO, you need to be careful about the data points you use as KPIs. There are a few key factors that you should consider:
- How much does it cost to produce the product or service? This is the most important factor, as you need to make sure that your prices are covering your costs.
- What is the demand for the product or service? If there is high demand, you may be able to charge more. However, if demand is low, you may need to lower your prices in order to attract customers.
- What are the prices of similar products or services on the market? You need to be aware of what your competitors are charging in order to stay competitive.
- What are your profit margins? You need to make sure that your prices are generating enough profit margin to sustain your business.
- What are your long-term goals? You need to consider your pricing strategy in light of your long-term business goals. For example, if you want to grow your business, you may need to sacrifice short-term profits in order to invest in growth initiatives.
2. Should I optimise for Margin or for Revenue?
There are a lot of factors that come into play when trying to optimise for either margin or revenue. It really depends on the business and what kind of products or services they offer. A lot of times, businesses will optimize for margin because it is easier to control costs than it is to control revenue. However, there are also times when businesses will optimize for revenue because they need to grow quickly or they are selling a unique product. Ultimately, it is up to the CFO to decide which one is more important for the company.
With pricing software like SYMSON, you can run scenarios that optimise for different goals.
Here is a video about How to Run Scenarios in SYMSON on our platform.
3. Should We Implement a Value-Based Pricing strategy?
By definition, value-based pricing is "the practice of setting prices primarily based on the perceived value of a product or service to the customer rather than on its cost to the provider." In other words, it's all about making sure you're charging what your customers are willing to pay, based on the perceived worth of your offering.
There are a few key questions CFOs should be asking when it comes to pricing:
- How well does our current pricing strategy align with our overall business goals?
- What is our target market willing to pay for our products or services?
- How much does it cost us to produce or deliver our products or services?
- What are the risks associated with implementing a new pricing strategy?
By asking these questions and taking the time to analyze the answers, CFOs can develop a clear understanding of their company's pricing strategy and make sure it is aligned with their overall business goals. Additionally, they can avoid any potential risks that might come with.
4. Can Price Optimisation Software make my Job easier?
As a CFO, you're always looking for ways to make your job easier and improve your workflow. One way you can do this is by using software to manage your pricing process. Software can help you automate tasks, keep track of data, and make complex calculations quickly and easily.
Here are some of the benefits of using AI-based pricing software:
- Better Insights: AI-based pricing software can provide deep insights into your pricing data. This information can help you make informed decisions about your pricing strategy.
- Increased Accuracy: With so many factors to consider, it isn't easy to set prices manually. But AI-based software can quickly and accurately calculate costs based on all the relevant data, without room for error.
- Improved Competitiveness: By using AI-based software, you can be sure that your prices are competitive. Price optimisation software can automatically track competitor prices and set up strategies to ensure your pricing stays in the average range or is the lowest amongst your main competitors.
- Combined Strategies: AI-based software allows you to combine different pricing strategies and apply intelligent business rules to get the best of all worlds. This ensures you have the most optimized prices based on multiple data sources while maintaining your margins and profitability.
CFOs Can Have A Key Role In Pricing Decisions
As CFO, you have a unique position to make key financial decisions. By answering these questions strategically and employing the right pricing tools and resources, you can align your company’s pricing strategy to meet its long-term goals.
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!
Do you want a free demo to try how SYMSON can help your business with margin improvement or pricing management? Do you want to learn more? Schedule a call with a consultant and book a 20 minute brainstorm session!
