COMMON PERSPECTIVES
CORRECT PRICING PRINCIPLES
“The market sets the price; we sell to the market.”
The market is determined by actions and reactions of competitors and customers. Each transaction is an opportunity to influence the market – for better or worse.
“Sales knows where we need to be.”
Sales knows their customers, not the market
Pricing is complex – part-timers are usually not experts.
“Sales reps are paid on margin, so they maximize it.”
Fear of losing a sale and lack of market knowledge frequently result in prices lower than necessary.
“If we lower prices we will make it up in volume.”
Those economics rarely work.
“Price is the most important factor with our customers.”
Not all customers & products are equally sensitive to price changes.
“If we raise prices we will lose volume.”
Price is important, but frequently not the most important factor.
“Our customers demand additional services but won’t pay for them.”
Customers will pay for differentiated services if they provide value.
“We don’t have the data to be more scientific.”
Most order management systems have the transaction details needed to determine opportunities.
“Our business is too complicated to manage pricing at the customer level.”
Shareholders expect managers to capture the value they provide to customers.