Corporate Culture – Pricing Strategy

Dear M&M:

Recently someone asked me what the corporate culture was at my company. I didn’t know what to say. Can you help me out here? 

— Marylyn

Dear Marylyn:

A corporate culture is the shared values and beliefs any organization has.

 There are visible expressions such as; dress code, social responsibilities, organizational structure, work environment, benefits and how the customer is treated.

In addition, there are invisible expressions like; moods, emotions, assumptions, standards, invisible rules, values and attitudes.

What tone do you want to set for your organization? Have you ever walked into a store or done business with a company and knew what to expect? Have you ever chosen to not do business with a company because they had values and beliefs different from your own?

The founder of Wal-Mart, Sam Walton was known for his concern and respect for staff. He created an environment of trust. He met staff, calling them by their first names. To this day people say, “I wonder how Sam would have done that?”

Developing a corporate culture can give a company a strong competitive advantage.

An organization’s norms and values aren’t formed through speeches but through actions. Strong cultures have teeth. They are much more than slogans and empty promises. Often a company with a customer friendly corporate culture can be a better place to work and shop. Corporate culture is sometimes referred to as this is how we do things around here. How do you want to be perceived?

M & M

Dear M & M:

I am trying to define a pricing strategy for my company any suggestions?

— Bill

Dear Bill:

Before you can define which retail pricing strategy to use in setting the right price, you should know two costs associated with the products and services you sell. These two key components are: Costs of goods sold and operating expenses to sell them. Costs of goods sold include; amounts paid for the product, any costs associated with making the product, direct manufacturing costs, labor in production, shipping and handling.

Operating expenses are; costs to operate the business, overhead, payroll, marketing, office supplies, rent, utilities, office supplies, insurance, outside services, any and all expenses necessary to sell the product or service.

Other things to consider are pricing sensitivity.

How sensitive is the demand for your product and services depending on other factors, such as the need (medicine vs. movie tickets), the availability of substitutes (gas vs. public transportation), and the relative size of the variation of price (new car vs. used car).

Price sensitive goods and services should be test marketed to determine impact on pricing and effect on demand before setting permanent prices.  There are four pricing most firms use.

The first one is called psychological pricing. It is based on a standard perceived price, based on quality and what a person recognizes to be fair-minded.

A second pricing method is value-based pricing. Value based pricing is a pricing structure based on actual prices of similar or alternative products.

The third pricing method is target return pricing. Target return pricing is set to attain a targeted return on investment. A final method is called cost-plus pricing and it is set at the cost to produce plus a mark-up to obtain a particular gross margin.

There are several methods to offer pricing discounts such as quantity, cumulative, time based, bundling, cash, loss leader, captive, and various other methods of versioning to arrive at pricing ones goods and
services.  Pricing is a important to any organization and special consideration should be given to what strategy or strategies one uses to position your company.

M & M

To ask your questions: Contact the Small Business Development Center (SBDC) at Cochise College (520)-515-5478 or by email at schmittm@cochise.edu.

Or contact the Sierra Vista Economic Development Foundation at (520) 458-6948 or at hollism@svedf.org.

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