Pricing: The Most Neglected—and Most Powerful—Lever in Your Business

Peter Drucker once called pricing “the most neglected area of marketing.”
That was decades ago—and it’s still true today.

Pricing isn’t just a number on a tag. It’s a reflection of value, confidence, and survival.
As Drucker warned, “Profit is not a reward for success—it’s the cost of survival.”

When businesses underprice, they don’t just give away margin.
They undermine their ability to invest, grow, and endure.

Why Pricing Matters More Than Ever

Hermann Simon, in his book Confessions of the Pricing Man, shows how most managers still approach pricing as guesswork.

They fear price increases. They overuse discounts. They confuse “competitive pricing” with “race-to-the-bottom pricing.”

He tells a story about the beer industry: within two years, the percentage of beer sold on promotion jumped from 50% to 70%.
The result? Revenue up. Profits down.

As Simon dryly notes, “Whether driven by opportunity or fear, this is clear evidence that managers think aggressive pricing helps their business. But does it really?”

The Russian Rule of Pricing

There’s an old Russian saying:

“In every market there are two kinds of fools. One charges too much, the other charges too little.”

Charging too much can kill momentum.
But charging too little quietly kills your future.

The key lies in understanding—and communicating—value.

The True Nature of Value

Simon shares a story about hiring a top tax advisor.
He spent 30 minutes on the problem and sent a $1,500 invoice.
Simon called to question it.

The advisor replied:

“You could have hired someone else who’d take three days to answer—and still get it wrong. I understood the problem in 15 minutes and solved it in 15 more.”

It’s a perfect lesson in value perception.
Customers rarely judge price in isolation—they judge the worth of what they receive.

That’s why the best companies price with confidence.
They don’t sell hours, products, or features—they sell outcomes, reliability, trust, and time saved.

Communicating Value Is the Real Game

Most people can’t recall the exact price of the last thing they bought.
But they remember how it made them feel.

A cheap product that disappoints stays with you as regret.
An expensive one that delights becomes a story you retell.

Hermann Simon’s own mother bought a Miele washing machine in 1964—a “crazy expensive” purchase for a farming family.
It lasted until she passed away in 2003.
That’s value.

As Volkswagen’s former CEO Martin Winterkorn once said:

“We need to build excellent cars—but the brand is just as important as the product.”

The lesson? Even perfect value is wasted if customers don’t understand or believe it.

Final Thought

Pricing is your company’s ultimate test of self-belief.
If you don’t believe your product is worth it, your customers won’t either.

Before you change your prices, change your mindset.
Because the only number that matters more than your price is your confidence in it.

Want to explore how to build a value-based pricing strategy

Let’s talk. tedb@strategyandexecution.com.au