Book Review: Confessions of the Pricing Man

There are thousands of marketing books written every year. Topics include the use of social media, advertising, sales, and so on. Try to find a book on pricing. There are very few. And yet, pricing may be the most powerful marketing tool of them all… and perhaps the least understood by many.

Hermann Simon is considered one of the world’s foremost experts on pricing strategy. A visiting professor at Harvard Business School, London Business School, and MIT, his firm has consulted with over 200 of the Global Fortune 500.

Like many of my clients, I typically take pricing for granted. I think of it as more of an art than a science. This book, “Confessions of the Pricing Man” has truly given me a different perspective on pricing as a marketing strategy and broadened my understanding on the science of pricing.

Here are just several of my key takeaways from the book:

  • “The single most important business decision in evaluating a business is pricing power. And if you need a prayer session before raising price, then you’ve got a terrible business.” – Warren Buffett
  • “The list of companies who have experienced enduring success with the ‘low price-high profit’ combination is not very long. Far more low-price companies have failed with that strategy than have achieved consistently high profits.”
  • US consumers tend to grossly overestimate the average profitability of companies. “In one study, US consumers estimated these profit margins at 46%.” The reality is that in the US the average net profit margin for companies is about 6%.
  • Of all the marketing weapons a small business has at it’s disposal, price is the most powerful in terms of improving profitability. On average, a 5% increase in price results in a 50% improvement in net profit.

This book may not be for all small business owners. But if you struggle with pricing decisions or would just like to see improvement in your bottom line, this book may be just the answer.