@PaulCharlton of @pricingfactory presenting at There was a great question from Howard Davies of @Contextworld at the GTDC meeting in EMEA in June: Do list prices matter? Here’s the final installment!
All the blogs so far have focused on answering the question. As is often the case with pricing, the answer to the question is actually of secondary importance. What is of greater importance is why the question was asked in the first place. You see, the question itself reveals that there is a pricing a problem, and immediately offers clues as to what the problem might be. When execs ask the question, they are very obliquely flagging one or more the following
- They don’t want you to change list prices;
- They are unsure that they will meet their targets, particularly if you change their list prices; their sales targets may indeed have been set too high, or the revenue and margin may be significantly out-of-balance; it’s highly likely the target setting did not take list price or discount reductions into account;
- They are thinking only about this quarter, and not even beginning to think about trying to set themselves up for success in the following quarter;
- They want more discretion & flexibility in discounting;
- They would like you to leave them alone mainly because they intend to dig themselves out of hole through discounting (which will invariably turn out to be inconsistent and unpredictable);
- They think they can haggle their way out of this by screwing good/friendly/weak customers.
- They are negotiating with you.
So they don’t realize it, but to me when they ask this question, it immediately raises a pricing red flag in my mind. There is a pricing problem here which needs fixing urgently. But while list prices aren’t the problem, they are definitely part of the solution.
Thank you Howard! Great question!
