A Definition of Pricing

Pricing is best defined as an “outcome.” Pricing is the outcome of four contextual factors:

Situation

Objectives

Perception

Capabilities

Before we provide the longer definition of pricing, note that situation, objectives, perception, and capabilities are not shaped exclusively by your company’s actions. Rather, pricers must accept that there are many influences that they do not control, just as on Wall Street. One major result is that unless you have a lot of market power, you won’t be able to fight buyer preferences in price structure. A Broadway show title put it nicely: Your Arms Too Short to Box With God.

Fighting is bad, influence is good. As a roadmap in considering what to influence, here is some detail regarding the four components of price: