Pricing your entire portfolio, one product/service at a time.
Performance pricers make attractive returns in almost every business, at least over the full business cycle. There are likely to be periods in a major downturn when even the best will have low returns, but these firms know that price cuts are almost always a one-way street, and they do not sacrifice their long-term viability and positioning for short-term volume. The research should also encourage managers to disaggregate their markets and seek out the differences and opportunities often hidden in current pieces of business.

So, look at your portfolio of products or services. Make a list of them, and figure out which need to be discounted to move (slow sellers, strong competition, outdated, short shelf life); which have prices that need to remain stable for long term viability; and which could actually incorporate additional features to promote their premium nature.

Pricing Question #5: What proportion of your volume comes from:

1. Discount necessary products/services
2. Pricing stable products/services
3. Incremental feature premium pricing

There is an unfair assumption in "fair" pricing policies: You do not determine what is fair, the customer does. An average price almost certainly means that some customers are, in effect, subsidizing others. Sooner or later, your competitors will tell them. Especially if you are in a

Performance pricers relentlessly communicate their value: why my prices are worth it, based on what the customer WANTS.

Pricing Question #4: What are three things your customer wants? Think big picture: why do they want a massage? why do they want estate planning services? Why do they want your painting? It's usually not about the "thing" but about how they will feel after they get the "thing" or avoid the "thing." Usually those feelings are priceless, so you have to show how YOUR product or service will definitely help them get there -- which means you can charge alot for that ability.

Many executives seem to think treating all customers the same way is somehow fair. For years UPS prided itself on the fact that "your grandmother paid the same price GM did." When it entered the market, FedEx became the fastest company to reach $1 billion in sales in part because its pricing recognized inherent value differences between customers (residential versus commercial), orders (parcels versus documents), time of delivery (8 a.m. versus afternoon), and other variables.

If you are uncertain how to establish a general fee for your service, you should be. You can determine a "reasonable and customary rate" based on the marketplace and your competition, but, especially if you are providing a service, you need to be flexible, and to use that flexibility as a marketing tool.

Pricing Question # 3: What is the Reasonable and Customary rate for your product or service?

Popular strategic doctrine has many executives sailing off, like Ahab or Sinbad, in search of "blue oceans"—market spaces where allegedly no one else is fishing. Avoiding competition is always nice work if you can get it. But most firms are better off emulating Odysseus—the sailor who sought prosperity closer to home—in the pricing opportunities inherent in their current business mix.

Those of us who are innovators by nature are always looking for new ideas that no one else ever thought of. Well, maybe. But probably not, and if they are that innovative they are probably going to take some explaining -- which costs money and erodes even a premium price's profitability.

Pricing Question #2: Looking at your existing products/services, really digging deeper into their different attributes, where could you raise prices, where do you need to discount to compete, and where can you stay the same? (Hint: the key here is really getting clear on what your different products are.)