Price setting is not just about adding a cost price and a margin. Pricing involves trade-offs between cost structure, competitive positioning, customer perception, and regulatory constraints. We will detail the mechanisms that really matter, particularly those that general guides overlook.
Rate revision rhythm: pricing as a continuous process
Setting a price once a year is no longer sufficient. Since the inflation wave post-2021, revising prices at least twice a year has become standard practice to preserve margins. The simultaneous rise in costs (energy, transport, salaries, software) renders any fixed pricing grid over twelve months obsolete.
The Arona Expertise firm explicitly recommends a revision at least annually, if not semi-annually, to avoid a mechanical erosion of profitability. We observe that companies that treat pricing as a continuous process absorb cost shocks better than those that wait for client renegotiation to react.
Practically, this means having an updated dashboard: unit cost price, gross margin rate, average price practiced by competitors. Without these indicators, any revision decision remains intuitive. To learn everything about price setting, one must first accept that the price is never a definitive acquisition.
B2B and B2C pricing: two distinct calculation logics
In B2B, the price is considered excluding VAT. The client recovers VAT, so they compare offers excluding tax. In B2C, the consumer sees the total price including tax, and it is this amount that triggers or blocks the purchase. This distinction seems elementary, but it conditions the entire pricing strategy.
Consequences on pricing policy
A product sold both in B2B and B2C requires two pricing grids and two negotiation approaches. In B2B, the room for maneuver focuses on volume, payment terms, and contractual discounts. In B2C, the psychological price and the display of the total price including tax drive the purchasing decision.
We recommend never to build a B2C price simply starting from the B2B price to which VAT would be added. The final customer’s acceptability threshold depends on perceived value, not on the cost price increased by a legal rate.
Perceived value versus cost price: where to place the cursor
The cost price + margin method remains the foundation of pricing. It ensures coverage of costs and a minimum profit. The problem arises when it becomes the only compass: one then deprives oneself of capturing the real value that the customer attributes to the offer.
The perceived value to cost ratio determines the transition to purchase. A high-value service sold at cost price leaves money on the table. Conversely, a commoditized product sold above market price generates negative volume without margin compensation.
Three signals to recalibrate
- The conversion rate drops while traffic remains stable: the price exceeds the acceptability threshold of the target customer.
- Quote requests increase but signatures stagnate: competitors offer a better value/price ratio, often through additional service rather than a lower price.
- Customers never negotiate: the price is probably too low compared to the value delivered.
Value-based pricing requires a deep understanding of one’s customer. This involves conducting willingness-to-pay surveys, analyzing average baskets, and tracking conversion rates by segment.
Commercial negotiation and price defense
Setting a good price is pointless if the sales team systematically undercuts it in negotiations. The pricing policy must include a structured discount framework, with clear thresholds and defined counter-parties (volume, commitment, early payment).
Granting a discount without a counter-party destroys long-term pricing credibility. The customer remembers that the displayed price is just a starting point, and every future commercial exchange begins with a request for a discount.
Anchoring and offer presentation
The anchoring technique involves first presenting the most comprehensive (and most expensive) offer before proposing alternatives. The first announced price serves as a mental reference. This mechanism works in both B2B and B2C, provided the premium offer is credible and documented.
- Presenting three service levels (standard, advanced, premium) allows the customer to position themselves relative to a benchmark, not relative to an isolated price.
- Justifying each price difference with a concrete benefit (delivery time, support, guarantee) transforms the discussion from “it’s too expensive” to “what do I get more”.
- Formalizing discount conditions in an internal document avoids ad hoc decisions that erode margins without strategy.
Pricing strategy and marketing positioning
The price communicates a positioning. A low rate signals entry-level, a high rate suggests exclusivity or superior quality. The price is a marketing tool as much as a financial tool.
Skimming pricing (high price at launch, gradual decrease) is suitable for innovative products with little direct competition. Penetration pricing (low price to capture market share) assumes the ability to absorb low margins while building a customer base. Choosing between the two commits the company for several quarters.
A common pitfall is changing pricing strategy without modifying the rest of the marketing mix. Lowering a price without adjusting the message, distribution channel, or packaging muddles customer perception and degrades positioning without generating the expected volume.
Price setting remains an exercise in balancing accounting rigor and market reading. Companies that document their pricing process, revise it regularly, and train their teams to defend their prices sustainably protect their profitability.