TapRun Consulting

The Pricing Newsletter

January 2019 issue

Happy New Year!

I hope your business initiatives this year prove to be profitable and enjoyable.

Fortunately, your goals can get that much closer when you apply a bit of strategic pricing.

Pricing Question from a Reader

Today's question comes from reader P. M.

You've repeatedly stated that specializing is one of the keys to maintaining a high degree of pricing power. However, I have two interests. Is it ever OK for a business to specialize in two areas at the same time?

Is it ever OK to double specialize?

Sure. Companies do it all the time.

Does it make sense if you're looking to maximize your pricing power?

The short answer is no and the long answer is maybe.

Almost everything I've ever read has been quite clear: firms need to establish a strong specialization before even thinking about expanding into other fields.

The reasoning behind this is pretty straightforward. Firms have a limited quantity of time, attention, and resources that can be devoted to earning a profit. For many firms, taking on two specializations means that their staff members will have half the time and attention to devote to each. Such diversions will necessarily cut the pace of technological advancement, the effectiveness of product marketing, and the efficiency of production. At best, such firms will be seen as jacks of all trades but masters of none.

In many cases, this general advice should be taken at face value. As they say, "he who chases two rabbits catches none."

But wait! There have to be at least a few exceptions, right? There are plenty of firms that have chased two (or more) proverbial rabbits and caught them both.

Are these lucky few merely the exceptions that prove the rule, or is there a model that we can create to explain how to predict which double specializations stand a reasonable chance for success?

I gave the matter some thought and came up with a few types of specialization pairs that might make sense for many business owners.

It should be noted that when there exists no benefit to the public pairing of specializations, many vendors will wisely choose to adopt a new persona so as to prevent the blurring of identities. Famed creator of the Harry Potter franchise J. K. Rowling wisely adopted the pen name Robert Galbraith for her literature for adults. This approach proves especially popular with corporations that have diverse portfolios. Mars, Incorporated, for instance, has chosen to utilize different brand names for selling its lines of candy and pet foods.

Double specialization, if implemented poorly, can represent a quick path to the poorhouse. Nevertheless, it does work quite well for certain businesses in certain situations.

Without knowing more about you, your goals, and your proposed specializations, it's hard to say whether a double specialization makes sense.

That said, if you can make it work, why not?

Questions come from readers like you. If you'd like your questions answered, send them my way.

Pricing in the News

From the Blog Archives

Notable Pricing Quote

"What we obtain too cheap, we esteem too lightly: it is dearness only that gives every thing its value." -- Thomas Paine

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