This note discusses how some firms (start-ups and established companies) maximize customer value and profits via their pricing processes. It is aimed at companies that compete on the basis of performance initiatives rather than absolute cost advantages and low price. It is suitable for use in courses or modules in Pricing, Entrepreneurial Management, Strategy, or Marketing.

Many companies have found that high sales volume does not automatically mean high profits. Among the factors that do affect customer profitability are geography, order size, and extra attention to keep the account. Some customers simply cost more to serve. Others will pay any price to get a certain product. If companies want profits and not just sales, they should start by understanding the differences among their customers. Careful analysis of customers and products will steer sellers into more profitable markets. Sellers should: know the exact amount and origin of costs; understand their profitability dispersion and set prices according to the value customers place on each product; focus strategy according to their knowledge of customers and their own strengths; install information and other systems to support a chosen strategy; and analyze profit dispersion and rethink strategy continually.

The most profitable industrial companies are successful not because they have the lowest costs but because they outmaneuver their competitors on price. These companies analyze the way pricing works in their industries. With this information, these companies design pricing policies that result in extra earnings of millions of dollars. The normal frequency distribution curve that emerges from comparison of orders for a product to its price is called the price band. A series of steps to shift the price band is a pricing strategy.