No Sacred Cows | Strategic Pricing Solutions

The year 2016 is almost over. All businesses should reflect on what has worked, and what has not worked; and they should be prepared to adjust in 2017. That evaluation should include reviewing the results of decisions made regarding pricing strategies and tactics. Equally important, the evaluation should be rigorous and thorough, and there should be no sacred cows. Regardless of who made the decision(s) or which customers were affected, the choices should be evaluated with a goal of making continuous improvements.

As you start your review of 2016 pricing decisions, consider these four main themes, and analyze them in detail:

1. Did you grow where you expected to grow?
2. Did you expand margins in the expected areas?
3. Did you capture the price increases you intended?
4. How have your prices affected your customer/prospect buying choices?

It is important to get the facts, even if they are inconsistent with company messages and plans. At many firms, growth is celebrated regardless of how and why it occurred. We have talked with companies who have set goals at the beginning of the year to price to value provided, and to correct underpriced products and accounts. Then when measuring results, those companies ignore the fact that prices were lowered at some large customers. It is considered irrelevant if the volume with those customers grew. But how do the companies know that volume would not have grown without lower prices?

If the decision to lower prices at specific accounts is not evaluated just as critically as other pricing choices, the organization will interpret that to mean prices don’t matter. To make real pricing progress, messages and actions must be consistent, even if it is uncomfortable.

Similarly, we frequently see companies realize much lower price increases than planned, but do nothing about it. They just accept the aggregate results as being due to strategic accounts. Unfortunately, simply accepting lower-than-expected results likely means the company is earning less profit than they could.

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No Sacred Cows.