Provides a block by block guide to creating a profitable pricing strategy. More on The Pricing Pyramid can be viewed at www.pricingpyramid.com.

1. Pricing Pyramid
A Block by Block Guide to Building a Profitable Pricing
Strategy

2. The Pricing Pyramid
The Pricing Pyramid was created to provide
a step by step or should I say a block by
block guide to creating a profitable pricing
strategy broken into 5 Tiers and 10 steps.
The Pricing Pyramid can be used to create
an overarching corporate pricing strategy or
can be implemented at the product level.
Additionally it is dynamic and can be
customized by industry or company.
As you move up the pyramid, you progress
from the basics through more advanced
pricing best practices with the peak being
your pricing goal.

3. Tier 1:
Tier 1 is the essential first step – don’t skip it!
Competitive
Data
RFP Data
Segment Data
Discount Data
Transactional
Data
P & L Data
Value Data
Customer Data
Market Data
Product Data
Data Silos
Data makes up the foundation of the
Pricing Pyramid and is a critical first
step. Data comes from many sources
and often lives in many silos (an
example is shown here).
Collecting, organizing and accessing
your data is critical in developing a
solid strategy.
Skipping this step will make all other
steps more difficult to implement.

4. Tier 2:
Tier 2 is considered the Blocking and Tackling of The Pricing Pyramid
Costs
Costs goes way beyond COGS and the monthly P&L. You will
need to drill into Variable Margin and Cost to Serve by
customer and product to determine where you make money and
where you don’t. You will need to understand the effect that
price and volume has on overall profitability.
Competitive Knowledge
All too often Competitive Knowledge is price focused and
anecdotal. Looking at it as a 2 step process changes this:
Understanding why a customer buys from you and understanding
what the competitor offers from a product, service and price point.
This gives insight into Barriers to Change and where your
competitor has weakness
Price Realization
RFP Management
Price Realization is basically the difference between List and
Sell price and how much of the list price do you realize. It can
be referred to as Gross to Net (G2B) or Discount Management.
If you have a sales force then you have a Price Realization
problem.
RFP/RFQ is basically “Request for Price/Quote”. Storing and tracking
responses gives valuable insights into; customer behavior, won vs. lost
and framing future requests. It will give a snapshot to price vs. value
buyers which rolls up to segmentation and value definitions. Product
success will become evident. Most importantly it gives visibility to where
sales teams should be focusing their efforts.
A quick analysis will demonstrate who is receiving the
discounts. The next step is figuring out why.
The RFP/RFQ is a fact of life in a B2B business. Creating processes to
store and manage it will lead to more successful bidding and a stronger
pricing strategy

5. Tier 3:
Tier 3 will start to tie the efforts of Tier 2 together
Value Creation
Segmentation
Product Strategy
Value Creation comes from
proactive conversations with
customers and potential
customers. It involves surveys
and logging conversations.
Internal conversations also
glean value perceptions
around price. Additionally,
Value Creation will monetize
your value by creating value
drivers and economic value
estimators.
Segmentation lives in the
middle of the pyramid for
good reason. Segmentation is
the heart of The Pricing
Pyramid. Properly
segmenting your customers
and products will give you
insights into all other blocks
around it.
Product Strategy includes
tiering, versioning and
development/lifecycle
management. With a good
understanding of product you
will be able to leverage your
strengths and maximize your
profitability.

6. Tier 4
Tier 4 is the last steps in your pricing journey – don’t give up now!
Sales Compensation
A sales force that is compensated on
revenue will result in a paid customer
advocacy group. Their primary goal will
be to increase revenue. Every client
push back about price will become the
urgency of the day.
Converting Sales Compensation to be
Margin or Net Price based will start to
change that process.
Value Training
As you move towards a pricing strategy
that incorporates value as one of the key
drivers, training becomes vital. Absent
Value Training, companies will not be
confident in their products or prices. Value
Training needs to take place at all levels of
the company – front line to front office.
Every employee touching a customer
needs to be operating from the same
playbook – one Value Proposition. Value
Creation is a difficult step – don’t waste it
by not training.

7. Tier 5
Tier 5; you reached the top so sit back and enjoy the view, right?
NOT
If you are not moving forward then you are moving backwards. You
now have a strategy in place across your organization. You need
constant vigilance to maintain it. Competitors are a constant threat –
looking for weaknesses in your products/strategies. You will see
turnover within your company. There will be new threats to your
profitability that must be met.
Your Pricing Goal should be one of constant improvement.

8. Architect
Jim Broderick is the architect of The Pricing Pyramid. Jim has over 15 years implementing and
managing pricing strategies in manufacturing, distribution, durable goods and professional
services. He has taken pricing best practices that he has learned and turned them into this block
by block guide to pricing. He loves to talk pricing so feel free to reach out to him at:
Website: www.pricingpyramid.com
Email: jim@pricingpyramid.com
LinkedIn: www.linkedin.com/in/jimbroderick1
Twitter: @Jim_Ppyramid
Phone: 508.361.8047