How to undermine your investment in your branding and devalue your own value prop with a few carelessly chosen words, like “80% discount”.
Make Your Pricing More Effective ...
How to undermine your investment in your branding and devalue your own value prop with a few carelessly chosen words, like “80% discount”.
A red flag when requested by a rep. It’s a flaming red flag when requested by a rep before they’ve even engaged with the customer. It’s a flaming red flag on fire when it’s requested by someone claiming to to be a “sales strategist”.
Disruptive pricing, n. gerund, aspirational.
When striving for consistent and predictable outcomes just won’t do. Get your disruptive pricing in first, before the opposition does.
Cost-plus pricing, n. gerund, delusional.
So going beyond Part 1 … cost-plus pricing:
– misses psychological price points
– effectively destabilizes the business because the list prices are set with no perception of customer value in mind (if the prices are set irrationally, customer behavior will be irrational)
– assumes that all the costs are cost-competitive, right? Wrong.
– temporarily shields uncompetitive product management, product engineering, procurement and product costing from economic reality
– prevents the necessary and creative tension between pricing (“these products are not cost competitive!â€) and costing/procurement (“oh yes they are!”) to help improve the business as whole
– is very apparent to professional purchasers & purchasing depts. and can be exploited accordingly
– would be severely lagged and ineffective when used for product life-cycle management
– can be easily gamed by the competition: it’s very obvious when a company doesn’t set its price competitively
– wait, don’t tell me that with cost-plus pricing you don’t even bother with competitive analysis either ….?
Cost-plus Pricing:
– “carries an aura of financial prudenceâ€
– “blueprint for mediocre financial performanceâ€
– “impossible to determine product’s cost before a price has been setâ€
cost = Æ’(volume) = Æ’(price) but if price = Æ’(cost) then you create an infinite loop which can will lead to the wrong solution (“flawed circularityâ€)
– creates a catastrophic cycle of a decline when competition increases: volumes decline, then overheads allocated to the products will increase leading to increased prices, which in turn will drive volumes down, increases overheads …. etc
2. Cost-plus pricing assumes costs are accurate, which is rarely the case, and, in reality, there is no good way of defining – let alone allocating – overheads:
cost = Æ’(allocations) = Æ’(volume) = Æ’(price), and again, if price = Æ’(cost) then you create an infinite loop which can will lead to the wrong solution (“flawed circularity†or – again, speaking in engineering rather than tabloid terms – catastrophic)
3. Sub-optimized pricing. Every price created by cost-plus pricing is either too high or too low. Every price could and should be improved.
Previously thought to be archaic but apparently in wider use than originally thought.CRAPIDO® is a superior Responsibility Assignment Matrix to help you manage your businesses processes more efficiently and effectively. It has more roles, and specifically more useful roles than other RAMS such as RACI and RAPID®, and, as such, it can form a key component of your Business Process Documentation. Here’s a mock-up of what the end result from using CRAPIDO® could look like:
CRAPIDO® is a more complete, practical and usable Responsibility Assignment Matrix than any other that has been published so far. Well, I would say that wouldn’t I? It’s easy to use and for some reason, a lot more fun to use than the other RAMs. But what else makes it better?
There’s some other subtle stuff that you can do with your RAM:
I could give you an example of bad practice here but frankly I’m not going to visually pollute this post with some of the stuff I’ve had to endure in the past. But you have to imagine, column headers with vertically rotated text in primary colors and, yes, Arial font. But there again, if you want to disguise your content and/or try and dissuade anyone from even reviewing your content even if they want to, that’s an excellent way to do it.
Here are some examples of Process Attributes that you could be using – or some variant of this – to consistently define the dimensions of your processes.
Finally, and most importantly, for some unknown reason, CRAPIDO® makes assigning roles & responsibilities somehow more digestible, less painful and more fun than it would be otherwise. Now, can you say that about any other Responsibility Assignment Matrix!?! I thought not. CRAPIDO® – for the Crap You Do!
You’re welcome.
#CRAPIDO
CRAPIDO® is a more complete, practical and usable Responsibility Assignment Matrix (RAM). It can be used to clearly define roles and responsibilities in pricing or indeed any other business process. Without an effective RAM, you’ll find a business is inefficient, ineffective and dysfunctional. And the people in them, under-performing and frustrated. Designing and documenting your business processes is an essential first step on the path to improve the way your business performs.
CRAPIDO® is a more complete, practical and usable Responsibility Assignment Matrix than any other that has been been published. Well, I would say that wouldn’t I? It has a complete suite of roles, it’s easy to use and for some reason, a lot more fun to use than the other RAMs.
The basic problem with other Responsibility Assignment Matrices (RAM) is that they simply do not have enough roles: most have four or five, CRAPIDO® has seven. Count them. Seven. And while I am a great believer in less is more, this is not one of those cases. RAMs with four or five roles are at least two or three sandwiches short of a picnic.
Having had to use RACI & RAPID® extensively – only because they were the corporate standard – I found them extremely frustrating. From my perspective of defining pricing roles and responsibilities, they are limited and incomplete. CRAPIDO® has been specifically designed to eliminate those frustrations.
RACI misses out on Agree, Perform and Out-of-the-loop. All rather essential elements, particularly in pricing.
RAPID® critically misses out Informed and Out-of-the-loop. Informed is part of RACI, PACSI, RASCI, RASI, RACIQ, RACI-VS, CAIRO, DACI & RATSI but somehow does not make it into RAPID®. This particularly problematic for pricing where communication of pricing decisions – both internally and externally – is crucial.
PACSI lacks a Recommender; RASCI is a bit kumbaya but nevertheless slightly improved version of RACI; RATSI misses out the Agree and Out-of-Loop roles and also doesn’t have a clearly called out role for Recommend. But one thing they all have in common: insufficient roles. RACI-VS comes closest with six roles but is really only suited for very bureaucratic or structured environments. Those extra roles are Verifier and Signatory, neither of which is really needed in business.
CAIRO is strangely the only other RAM which includes Out-of-the-Loop but still manages to be incomplete. Out-of-the-Loop is not just some crap I made up. Out-of-the-Loop is the opposite of In-the-Loop in case you’re unclear. If you’re in THE pricing meeting, you’re “In-the-Loop”. If you’re out of THE pricing meeting, then you’re “Out-of-the-Loop”. Really. Oh, and if your pricing meetings aren’t that vital, maybe you should put some effort in to making them that vital (before your competitors make theirs more vital than yours).
Well, here it is in all its technicolor glory. Who gets to do what by job function, by process.
All told, it’s small, but I hope you’ll agree, perfectly formed.
It’s all agreed, documented and then parked on an internal website. Now no-one can claim that they don’t know what the process is, how to get involved, what their role is. It should be reviewed at least annually with quarterly opportunities to modify if required. All disagreements on who should be doing what will dissipate to a distant memory.
The real skill is making sure you have have an agreed philosophy for the allocation of decision-making responsibilities, the right processes defined (the rows), and, oh yes, and use Out-of-the-Loop to take out groups or individuals who don’t add value and slow the process down. O!
Finally, and most importantly, for some unknown reason, CRAPIDO® makes assigning roles & responsibilities somehow more digestible, less painful and more fun than it would be otherwise. Now, can you say that about any other Responsibility Assignment Matrix!?! I thought not.
CRAPIDO® – well, let’s just say it and get it out there – for the Crap You Do!
You’re welcome.
#CRAPIDO
Sorry! Dozed off there completely. But this is what your revenue will look like if you do not pay attention to pricing!
I think they always knew they had a problem but they just didn’t want to admit that their replacement of the company’s core product was technologically obsolete by the time it was launched. This was exacerbated by senior execs – I’m using the term “senior” very loosely at this point – longing for the old days of “proper computing”. Whatever that was. I think the last time we had “proper computing” was when there was a British Empire, Morris Minors, 8″ floppies, before The Cuckoo’s Egg, that sort of thing.
But out of all the problems they had, I bet they never once considered that part of their problem was that their pricing strategy was continually undermining the business. It wasn’t just the obsolete technology, the lack of backward compatibility, the disintegration of their application ecosystem, their failure to modernize their GTM mechanism, the collapse of their support model due to using much more reliable components, virtualization, hyper-converged infrastructure, the cloud, the rise of OEMs … It was also pricing. All the time, it was pricing.
If you’ve never got your pricing mojo working, if you’ve never experienced the thrill of crushing the competition because your pricing is just so on top of it …. then get a real expert in. Someone who actually knows what they are doing.
Better Call Paul 281-782-9821
Don’t waste your time and money implementing a pricing system without knowing what you’re really doing.
Get a real expert in. Someone who actually knows what they are doing.
Do you want to see what their competition was doing? Sure you do …
Just make sure it doesn’t happen to you.
Better Call Paul 281-782-9821 Ask for a conflict check sooner than, well, before you end up like Competitor #1.
1. Is your pricing effective?
2. Do you get actionable insights?
3. The Impact of Effective Pricing: A Case Study
4. How do we achieve that "magical" pricing effect?
5. How do we create that pricing "magic"?
6. What is the deliverable?
7. What do you gain with effective pricing?
8. How can we do business together?
September 15, 2020
High List (Price), High Discount, n. technical, obsolete. How to undermine your investment in your branding and devalue your own value prop with a few carelessly chosen words, like "80% discount". … [Read More...]
September 2, 2020
Price Floor (2), n. a tell. A red flag when requested by a rep. It's a flaming red flag when requested by a rep before they've even engaged with the customer. It's a flaming red flag on … [Read More...]
August 18, 2020
Price Floor, n. technical. 1) The deal price at which you no longer need a Sales Rep; 2) The deal price which, if you did all deals at, you would no longer need a Sales Department. … [Read More...]
April 22, 2020
Disruptive pricing, n. gerund, aspirational. When striving for consistent and predictable outcomes just won't do. Get your disruptive pricing in first, before the opposition does. … [Read More...]
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