Accurate pricing for improved profit

When pricing a product, you have to get it right. Overpricing will lead to lost sales that would have been profitable at a lower price, while underpricing leads to sales that bring revenue without profit. Activity-based pricing is a new paradigm for improving profitability by reducing the occurrence of pricing mistakes while placing less emphasis on increasing revenue and more on improving profits. Pricing for Profitability will help any company set prices that are both attractive to buyers and profitable for the company.

Activity-based pricing will help you:

• Establish prices based on solid knowledge of customer demand and product cost
• Stop unintentionally pricing products at a loss
• Determine how much of a price is profit
• Use superior financial knowledge to generate superior financial return

Accurate pricing for improved profit

When pricing a product, you have to get it right. Overpricing will lead to lost sales that would have been profitable at a lower price, while underpricing leads to sales that bring revenue without profit. Activity-based pricing is a new paradigm for improving profitability by reducing the occurrence of pricing mistakes while placing less emphasis on increasing revenue and more on improving profits. Pricing for Profitability will help any company set prices that are both attractive to buyers and profitable for the company.

Activity-based pricing will help you: Establish prices based on solid knowledge of customer demand and product cost Stop unintentionally pricing products at a loss Determine how much of a price is profit Use superior financial knowledge to generate superior financial return

Three things can happen when establishing a product price. A price set too high is a lost sale that could have been profitable at a lower price. A price set too low is rewarded with unprofitable work. Only when a price is set appropriately does a company make both a sale and a profit. Just as activity-based costing and activity-based management revolutionized the cost accounting world, activity-based pricing will bring a disciplined approach to developing pricing. Activity-based pricing examines the relationships between price, cost and sales volume and how this relationship effects profitability. Pricing for Profitability joins the disciplines of marketing, economics, business strategy, engineering and cost accounting to achieve maximum profitability.

JOHN L. DALY is President of Daly Consulting and Executive Education Inc., which provides consulting in pricing strategy and profit im-provement. Executive Education Inc. produces continuing professional education seminars for financial managers. Mr. Daly is also a former manufacturing company CFO.

Acknowledgements.

Preface.

Pricing for Profitability.

Economics and Demand.

Competitive Strategy and Pricing.

Understanding Pricing Strategy.

Costs.

Activity-Based Costing.

Activity-Based Pricing.

Activity-Based Pricing Models.

Influence of Capacity Utilization.

Target Pricing.

Price Negotiations.

Conclusions and Summary.

Glossary.

Index.