It’s simple, be nimble- Part 1

It’s simple, be nimble- Part 1

Pricing strategies for professional firms

The new financial year has not been easy to most. Professionals like CAs, lawyers, Engineers, consultants and others in the service sector are no exception. But can we wait for safe and secure world to emerge, to start evaluating options to meet the challenges of “New Normal”.

It is time to rethink everything that will ensure speedy recovery and growth of the firms.

The most important element in any firm’s marketing strategy that produces revenue is “ pricing”. Effective pricing decisions are essential for every firm’s profitability and long term survival.

In fact the fruits of all the hard work, that has gone into rendering a service to a client, can be reaped only by effective pricing strategies. Although effective pricing decisions cannot compensate for shoddy execution, ineffective pricing decisions can certainly prevent good firms from achieving success.

Nimble and proactive firms need to understand that pricing decisions can be implemented relatively quickly and hence useful for fast recovery.

Pricing decisions would require:

1. Setting pricing strategy objective

2. Selecting pricing method

3. Effective implementation.


Various pricing objectives are listed below:

1.    Quantitative:

i)      Recommended– Achievement of satisfactory profits, Maximum utilization of capacity, Full cost recovery, Liquidity management, Return on assets/investments, achievement of satisfactory sales and achievement of satisfactory market share

ii)    Others- Profit Maximization, sales maximization, market share maximization, market share increase and discouragement of new competitors entering into the market.

2.    Qualitative:

Retention of existing customers, long-term survival, Customer’s satisfaction, attraction of new customers, service quality leadership and achievement of social goals.

Firms can choose to pursue more than one objective. Short term and long term objectives again may be different. Priority of objectives may change in the light of changing scenario.

Most qualitative objectives will be relevant at all times for all the firms but impact on cost for fulfilling these objectives cannot be ignored. Firms can define policy to deal with this conflict and also provide exceptions to deal with individual cases.

Pricing methods:

Various pricing methods are listed below-

Pricing based on cost

1.    Cost plus profit margin

2.    Break-even price plus profit margin

3.    Price based on sales/ profit goal

4.    Price based on direct cost

Competition based pricing

1.    Pricing similar to competition’s price.

2.    Pricing above competition’s price.

3.    Pricing below competition’s price.

Price based on customer

Based on customer’s perception of value.

Firms can choose different methods for different situations and situations can change rapidly.

In these uncertain times, firms need to become nimble to face the future as it unfolds.


Next article: It’s simple, be nimble – Part 2

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