Pricing Methods: 5 Things People Say When They Do Not Get “Pricing”

 

 

 

There is an old saying that “many a true word is spoken in jest” – a statement apparently attributed to Chaucer. In this short blog we take a lighter approach to highlight common misconceptions that pricing professionals often hear. This could even be thought of as a way to learn by asking questions – in the Socratic style. We suggest you keep a bingo card and tick them off if you have heard them. If you have heard them all before in your career – you can pat yourself on the back. Of course the next step, and much more challenging is to try to win over the person to the side of pricing and revenue management.

 

Note: we do not intend to belittle the common queries made by non pricing professionals, as of course they can be valid concerns when not answered with a clear and comprehensive solution.

 

Pricing methods – how many of these statements have you heard before?

 

 – You can not just increase prices

This is one of the first that you often hear – and is based on a fundamental misunderstanding of the pricing profession and pricing methods. We listed this one first – as if you can not get past this one, you have no chance of getting buy in our implementing pricing optimisation. A good answer to this question will enable you to move on to more complex questions such as below. See our blog on premium pricing strategy.

 

 – Is this some sort or pseudo science – with magic numbers?

 

This one can come up – or a variation on it when the concepts of psychological pricing, relative pricing,  anchoring or numbers such as $5.99 are brought up. This should be viewed as a good thing as it opens the door for more discussion.

 

 – Our sales force will never accept this pricing project or new pricing methods

 

This is a great indication as to how the business is actually set up and who carries power. It can also give you a great insight into why margin erosion may be appearing. At this point, it may be a smart idea to think about how sales teams are incentivised.

 

 – You need to know our costs – or drive our costs down more

 

This one follows directly from the one above – if not a sales driven organisation, it may adhere loyally to a strict cost based pricing strategy. Do the finance team have a large say in pricing strategy? This gives a great indication as to where your work should begin

 

– It will not work for us – as our industry is different

 

We left this one to last – as it is probably one of the most common comments. The funny thing is that we have not seen an industry yet where pricing improvements can not be made.

 

See our blog on how pricing can help when making a business plan. Also see our blog on 5 real issues with a cost plus pricing strategy and transformation pricing.