Price it right: the art and science of pricing.

• Author: Horkan, Louis

There's an old business axiom: "Any deal is a good deal at the right price."

Simple enough. But arriving at the "right" price for the product offered is actually a tough proposition. The risk to the consumer is overpaying, resulting in buyer's remorse. The risk to the provider is much greater -- selling at an unprofitable price, or at a price the purchaser refuses.

Sound oversimplified? Unfortunately, setting the wrong price for products and services is a mistake repeated by both new and mature companies, resulting in underperformance or failure. So how is it that a company could successfully plan, develop and deliver a new product and then fail to attract buyers? Or worse, sell at an unprofitable price? More perplexing is how an existing profitable product can reverse course to become a financial albatross. The simple answer is the failure to price smartly.

Eric G. Mitchell, president of the Professional Pricing Society, which touts itself as the world's only association dedicated to pricing management, says pricing is often overlooked by business, treated as more of an art than a science. For many managers, it's easier to focus on costs, production and marketing than to figure out how best to price a product.

"The problem facing many companies is that they give away profits by not pricing properly," Mitchell says. "Without a well-designed pricing structure, even a well-run company will suffer, especially during tough economic periods."

That's a view shared by the self-proclaimed "Pricing Guy," Tim Matanovich, founder and general partner of Market Leaders Group LLC, a Colorado-based business-consulting firm. His firm helps companies benefit from the utilization of value-driven sales, marketing and pricing strategies.

"It's not a matter of recognizing the significance of pricing. Every executive that I talk to understands how important price is, often worrying day and night about their pricing."

But their actions, Matanovich says, tend to discount that viewpoint.

Many managers "simply do nothing proactively to manage their pricing," says Matanovich. Anecdotally, he estimates that less than 20 percent of companies take pricing seriously enough to do something about it, such as sending their people to conferences or workshops on pricing.

Presently, both Mitchell and Matanovich see opportunities on the pricing side that many companies have failed to exploit.

"Given the environment of the last few years, almost everyone's exhausted the cost-cutting side of the...