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How Would Testing Delays Help or Hurt Your Ability to Check Different Price Structures?

Jul 3, 2008
Have you ever raised prices at the start of a weak economic period? It didn't work very well, did it? Or lowered prices, just as the economy took off? You ended up with a lot of less profitable volume than you needed to, didn't you?

So timing and circumstances are important. Today's best pricing structure may be a foolish one tomorrow. As you look at proposed pricing structures, you need to think about how well each one fits into the various types of business and economic environments that are likely to occur.

As mentioned before, you should think about these tests in terms of being something that you may have to expand very rapidly based on customer and competitor reactions. In the context of that requirement, you may not yet be prepared to undertake some of these tests. For example, if you do not have enough capacity to handle the potential volume increases, you may give away much of the advantage that you would gain by surprise.

Alternatively, some of these tests may make no sense unless they are done right away. So, for them, it's now or never. An example may be a price structure that would become obsolete if any of the other tests worked.

For instance, this may be a structure for spot pricing of occasional purchases and all of the other tests involve converting every customer to long-term contracts. Another example would be a test that would make other tests impractical to do. Turning the example around, the long-term contract tests, if successful, would probably preclude many short-term price structure tests.

In other cases, the continuation of a trend may mean that a new structure will be more appropriate in the future than today. If the trend were to reverse, it may never be timely to make a change. For instance, if gasoline prices were to spike, many products (such as SUVs) would probably see their volume hurt while products that required less gasoline (like compact cars) might increase in volume. But, knowing that gasoline prices can be volatile, changing price structures to make more profits on compact cars could be untimely unless the price of gasoline would rise permanently. That would most likely to occur if taxes were increased to the sorts of levels seen throughout Europe, which are government policy designs to reduce oil imports.

Further, if tests can be done more safely by first lining up partners and acquisitions, those relationships take time. Your tests may have to be delayed by 3-12 months, as a result.
About the Author
Donald Mitchell is an author of seven books including Adventures of an Optimist, The 2,000 Percent Squared Solution, The 2,000 Percent Solution, The 2,000 Percent Solution Workbook, The Irresistible Growth Enterprise, and The Ultimate Competitive Advantage. Read about creating breakthroughs through 2,000 percent solutions and receive tips by e-mail by registering for free at

http://www.2000percentsolution.com .
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