Pricing

Posted: November 3, 2010 in pricing
Tags: ,

 Conflicts arise in the field of pricing. As research indicates, broad agreement on pricing actions is unlikely to be had anytime soon and, in fact, appears to be undesirable.

Contrasting orientations towards products versus markets and short versus long time horizons both have direct effect on pricing decisions. Skim versus penetration pricing, product portfolio pipeline, price integrity, and influencing industry trends versus customer requests, quarterly profit calls, and market share fights. Pricing must weigh in on each of these issues. In doing so, it has a responsibility to promote a point of view, collegially but firmly, in favor of value differential based pricing, controlled discounting, and price war avoidance.

Sales and others will argue for price discounts, cuts, and commoditization. That is what the customers are most likely to request and claim, time and time again. That’s what sales will hear. Eventually, someone will believe it and then start preaching it internally. If these customer facing people did not request discounts, cuts, and argue at times that your highly differentiated product wasn’t a commodity, you should be wondering if they actually talk and listen to customers. Many have argued that it is best to have the salespeople act as advocates for customers within the firm.

Truth will lie somewhere between the two poles. It is the job of pricing to be bold in capturing margins, maintaining price integrity, and avoiding pricing errors. If you don’t hold up your side of the argument, there is only one way things can go.

 Harmony means that not all points of view are brought to bear on key pricing issues. A little respectful contention, where the parties periodically hold contrasting points of view yet are able to listen and learn from each other, is fundamental to high performance pricing. (Just as the two handed economist was a forefather of pricing, it is good for a pricer to hold conflicting ideas concurrently.)

Or, in other words, if you’re a wimp don’t get into pricing because it is likely the most stressful and least supportive position you can find. Yet that is the job and it is of key importance to the firm that it is done well. Take the lashes as a badge of honor. But maintain your ability to be collegial and listen

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