With digitization has come rapid change in how we view and analyze pricing decisions. It is no longer viable to price on a set-it and forget-it basis. The many factors impacting pricing can now be analyzed with data-driven programs. Today, data is critical to your pricing strategy.
Factors to Consider
Here are a few factors to consider when setting your pricing strategy.
Consistency — Is your pricing consistent across platforms? Do your customers get different pricing from the Outside Sales Rep (OSR), Inside Sales Rep (ISR), eCommerce orders, Customer Service Rep (CSR), and/or counter store reps? Do your salespeople know how the pricing works?
As senior vice president of sales, I would field calls from OSRs. They voiced their dissatisfaction regarding the inconsistency in charging customers the quoted price during store pick-up. Furthermore, the issue extended to products that were substituted for the originally quoted ones.. If your pricing is inconsistent, less scrupulous customers can play one employee against the other, costing you money.
Pricing overrides – Human nature comes into play in pricing consistency. Whether retail or wholesale, we tend to migrate to the contact we think will give us the best price. When the client states they are a large user, do your reps override pricing guidelines and offer inappropriate discounts?
Customer contracts – Are your customers using their contract pricing effectively? Is the pricing in a viable metric? Given the complexity of today’s marketplace, OSRs are no longer in a position to set good customer-specific pricing (CSP).
It is no longer realistic to “set it and forget it.” The “discounting from list” strategy isn’t reactive in today’s dynamic digital marketplace. Hard-loaded fixed pricing policies should no longer be used. Given the environment of the last couple of years, fixed pricing can rapidly lead to instant margin erosion.
If 60% of your revenue is set by CSP, analyze where your sales dollars are coming from to ensure the correct margin. Know your renewal dates. Find out where the product volume is flowing. Evaluate the price points, especially on the most expensive products, and manage your customer contracts.
A Dynamic Pricing Strategy
Remember, technology has changed the dynamics of pricing strategy. When calculating price outcomes use digital tools to be able to consider the many factors, like price inconsistency, that impact your bottom line.
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