THE 4 EVILS OF

MARGIN-BASED
PRICING STRATEGY
insights from

Margin-based pricing great in theory.

It predetermines profit for a specific
product by setting a definitive goal for the
difference between price and cost.

BUT
It creates a host of potential issues,
because determining price involves
many more factors than just cost.
Margin-based pricing ignores these other variables.

Margin-based pricing is easy.

But it weakens your results.

Margin-based pricing has

4 MAJOR EVILS

Evil Number One:

Emphasis on cost,
not value

Creates a disconnect between your price

and the value you create for the customer.
This puts your profits at risk.

Your Plan of Attack Against

Evil Number One:

Identify the value you bring to

customers and communicate
it to them during pricing
discussions.
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Evil Number Two:

Assuming Your
Customers Are Clones

Are you treating your customers like

the exact same person?
This creates three problems:
1. Inability to create tailored value
propositions
2. Sacrificed increased margins from
customers willing to pay more on value
3. Risk of customers who draw the line at
a specific price point

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Your Plan of Attack Against

Evil Number Two:

Segment by customer and

related variables to
determine the most
profitable price for every
transaction.
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Evil Number Three:

Assumption Your
Products Are Clones

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Are you lumping all of your product

strategies together as well?
This margin-based evil fails to consider how
customers need and use products differently.
It also fails to consider slightly different costs
to your company from product to product,
costs you could be recouping through your
pricing strategy.

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Your Plan of Attack Against

Evil Number Three:

Segment your products as

narrowly as possible and
price them accordingly.

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BONUS TIP:

Further segment pricing

down by a customer group
and product for the most
profitable pricing possible.
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Evil Number Four:

Relying on Volume for

Profit Improvement

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If you focus only on volume, youre completely

ignoring customer and product mix.
Volume isnt your only lever for profit
improvement.
This strategy sets you up to have to drop
prices to reach your sales goals negatively
impacting your overall profit goals.

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Your Plan of Attack Against

Evil Number Four:

Use a business analytics tool

to evaluate all five profit
levers (price, cost, customer
mix shift, product mix shift
and volume) to build your
pricing strategy.
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YOUR STARTING POINT:

Find and leverage

customer and product
trends within your sales
transaction data to
determine pricing at a
transactional level.
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Need a good tool?

KiniMetrix provides actionable

insights overnight for a stronger
pricing strategy tomorrow.

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START YOUR FREE TRIAL

Sign up for a free trial today to see
KiniMetrix analytics in action.

thekinigroup.com

WHAT IS KINIMETRIX?

KiniMetrix is the last-mile of Business Intelligence.

The award-winning solution helps you make the leap from
traditional BI Platforms to generating actionable insights to
improve your bottom line.

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WHAT MAKES KINIMETRIX DIFFERENT?

Award-winning, Cloud-based, SaaS solution

Accessed via browser zero footprint with no installation

required on local computers
Typical impact on margins: 2-3% realized improvement
within 12 months of implementation

2
4

Typical deployment time: < 24 hours

hours

Robust: tested and deployed in environments with hundreds of

millions of transactions
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