Author: Rafi Mohammed
Publisher: Crown Business
Year Published: 2005
Rating: 
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According to Rafi Mohammed, every company has a source of hidden profits and that if they’d only price their products and services more effectively, they’d increase their profits and generate growth. For those who are uncomfortable with the idea of raising your prices, take heart – Mohammed doesn’t advocate ripping off or taking advantage of your customers. He simply feels that if you offer customers options on pricing, they’ll pick the one that works best for them – and often, that’s the higher priced option.
At the heart of Mohammed’s pricing strategy is the fundamental notion that some customers will value your products and services more than others. Companies can maximize their profits and serve as many customers as possible by creating products and services at different price points based on those different perceptions of value.
Mohammad uses the example of his friend’s gourmet restaurant. His friend is in business to make money, but he doesn’t want to just serve rich people. So Mohammad recommended that he offer different services for each type of patron such as early-bird specials, senior citizens’ discounts, regular menu prices, discounted 3 course meal bundles, and premium margin chef’s table seating.
To create the optimal pricing strategy for your company, you must build a culture of profit within your organization. That means sharing information on product profitability with your employees, providing guidelines for when they should cut prices or give discounts, plug back doors to unnecessary discounts and ditch unprofitable promotions, and reward your best customers.
The next step is to price your products based on their perceived value to your customers. To help you do so, Mohammad provides a 5 step “Value Decoder” framework that will help you analyze the components of your product or service that make up its value.
The book is divided into 10 easy-to-read chapters and provides a good mix of anecdotes, case studies and business theory. It’s lighter reading than an academic tome – there are no math, excel spreadsheets, or supply/demand curves – yet it’s clear that Mohammad has a background in economics (Ph.D. from Cornell).
If you are new to pricing strategy or have been struggling with how you should price your products and services, this book is a must read. You will walk away from the book with a framework for discovering how much different types of prospects and customers will likely pay for your products and services. Yes, there’s still an art to pricing, but after reading this book, you’ll be much better armed to price your products and services more profitably.
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