Value, Cost, and Price
Updated: Jan 11, 2021
Businesses live and die by the value of their products and services. It is the purpose of every enterprise to establish “why they do what they do” and the value that the product or the service brings to the table.
Once the value is established, the business needs to regularly evaluate its relevance and innovate accordingly.
The next step is determining the cost of the product or service. Sustainability of any product or service and the business depends on the profitability of the product or service. It is thus critical to deciphering the unit cost of the manufacturing or delivering the product or service to the ultimate customer and the profit per unit that the market will allow the business.
Sustainable vs. Strategic Pricing
The transparent, rule-based, aligned, and mature accounting system captures the relevant costs, enabling us to arrive at the cost per unit of the product or service. The sum of cost per unit and profit per unit establishes the benchmark or the minimum sustainable price of the product or service.
It is here that strategic pricing is critical to success. Strategic pricing is the art and science of base-lining the value and determining the amount the market is willing to pay so that the benefits of acquiring the product or availing the service far exceed the pain or loss from not acquiring the product or availing the service. The strategic nature of this activity demands objectivity and a periodic review that needs to be independent and unbiased.
Consulting Services from BOOKKEEPER
In these dynamic times, organizations need to be constantly challenged on the status quo. This is probably the best manner to anticipate change, embrace, and live through it.
Through our consulting role, we:
1. ask decisive and incisive questions
2. professionally challenge the business assumptions
3. exercise professional skepticism
4. institutionalize the process, technology, and automation
5. align the organizational structure to facilitate responsibility, delegation, and accountability
We are able to unlearn, learn, and relearn while blending with the business and the stakeholders. This allows us to add value in whatever we do and reinforce that we are relevance in deed!