Pricing is one of the most powerful, yet overlooked, tools in business. In a recent podcast, Caroline Cookson highlighted how having a clear pricing strategy is key to growth.
Dynamic pricing means adjusting prices based on factors like demand, competition, or timing. It’s about finding the sweet spot, the price that reflects value to your customers and supports your business goals. And here’s why it matters: even a 1 % increase in price can boost profits by up to 8–11 % (McKinsey).
The Challenge for SMEs and Advisers
- Stuck pricing habits: Many SMEs set prices once and never review them again. That’s risky when markets, costs, and customer expectations constantly change.
- Trust issues: Discounting to win back customers or changing prices without explanation can damage confidence and lead to a loss in trust.
- Fear of change: Adjusting prices can feel risky, especially without good data. But staying still can be even riskier.
- Struggling to show value: If you can’t link price to the results you deliver, like time saved or revenue gained, it’s hard to justify charging more.
Core Principles of Dynamic Pricing
- Start with value: Price based on the benefit you deliver, not just your costs.
- Segment your market: Different customers value things differently, reflect that with tiers, bundles, or add-ons.
- Keep an eye on the market: Track what competitors are doing and how demand changes.
- Be transparent: If prices rise due to higher costs or added value, explain why. Clarity builds trust.
- Test and learn: Trial small changes. Review results. Adjust. It’s not about guessing, it’s about learning what works.
How to Put It into Practice
- Review your pricing: Map out your products, what they deliver, and how customers perceive value.
- Set clear targets: Know your minimum and maximum prices and when discounts are acceptable.
- Pilot a change: Test pricing with one product or customer group before rolling out wider.
- Track and refine: Measure conversion, churn, and profit margins to see the impact.
- Keep communication open: Tell customers why prices are changing and what value they’re getting in return.
The Results
Dynamic pricing helps you:
- Protect margins when costs rise
- React quickly to market changes
- Strengthen customer trust through transparency
- Improve profitability — often in double digits once mature
According to McKinsey & Company, businesses that improve their pricing strategy can see an average 2 – 7 % increase in return on sales, and up to 8–11 % growth in operating profit from just a 1 % price change. That’s a powerful reminder that small, data-driven pricing decisions can deliver big results for both advisers and their clients.
Setting a measurable pricing strategy is key for measuring the success of your business strategy.
Media & Links
https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/the-power-of-pricing