The impact of price
An often overlooked lever in productivity is price. The measure of productivity is a value (£), so price plays an important part. Productivity is not the same as efficiency which is defined as:
“Accomplishment of, or ability to accomplish a job with a minimum expenditure of time and effort.”
Productivity takes into account that unless you sell what you have accomplished, it has no value. Productivity is concerned with the output of a whole process while efficiency is "doing things right."
Pricing strategies are frequently defined when a business first opens, and except for rises due to changes in the supply chain or cost of living, the underlying approach is rarely reviewed.
Price can have a significant influence on how successfully a company may sell its goods and services. In Keynesian economics, the law of supply and demand describes how at a given price, supply and demand vary, when prices are high, demand is lower and vice versa.
This thinking does not consider the brand promise. We can all think of premium-priced brands which still generate significant demand. You only have to look at the queues outside an Apple store whenever it launches a new iPhone to see this.
Apple has a ‘valued' pricing strategy. It knows it can charge whatever it wants because the market values its products. The fact that it is ‘known' for innovative and easy to use products, and delivers this consistently, is of course, interlinked.
The key to understanding how to move higher up the productivity pyramid is to appreciate that price isn't at all about money. Price is everything to do with value.
“Price is what you pay. Value is what you get.”