How To Do A Pricing Program Wrong

orca upcOver time I have found that much of my expertise was derived from error.  I’ve tried to console myself by comparisons to Michael Jordan who famously missed more than 9,000 shots during his career. Some commentators say ‘mistakes are good things’ because attempts are the best way to hone one’s skill. None of those commentators were my employers who dryly viewed my botched attempts as further confirmation of my perceived shortcomings. But I’ve learned a lot from mistakes.

Lately manufacturers of branded products have ‘discovered’ pricing programs.  The advent of sophisticated net-only sellers has persuaded them to take a look at new ways to achieve adequate margins and maintain product equity. Some manufacturers believe lower prices disrupt their brand message. They feel powerless as they watch their products being footballed in the marketplace. Their resellers eagerly corroborate this view and claim price competition as the reason they can’t compete with internet sellers.

So why not adopt a pricing program? Some of the most iconic brands have been doing it successfully for years. It just can’t be that hard.

How to do a pricing program wrong

Here are my tips for how to do pricing programs wrong.  You can pick one or two or select them all if you really want a ghastly mess. Following these tips will allow you to have a pricing program that is weak, confusing, ineffective and sloppy. There is the potential bonus that by implementing programs with these features you  may cross the line and do something unlawful.

1. Flatter those brands you admire by copying their pricing program language.  After all if they are using it it must be correct.

2. Insist that your resellers know you are adopting a pricing program to shield them from sellers who compete on price.  They should appreciate what the benefits are for them.

3. Be sure to be specific about what you will do in the event one of your resellers does not conform to the program. This is your chance to be viewed as especially harsh to indicate how important the program is. You want them to know the bad things that are certain to be in store for them.

4. Let your resellers know how you will make decisions about the program. Similar to the way you share your decision-making process in other parts of your business tell them exactly what you will consider and the expected outcomes.  It is here where you can mention colorful analogies to lightning bolts and baseball strikes.

5. Only train those people within your company who need to know the details of the program. By limiting the knowledge about how the program works and its benefits it makes it easier for Attorneys General  to identify who they need to speak with when they have questions.

6. Don’t establish designated individuals or create a protocol for communications about the program.  Let your resellers deal with the members of your sales force who are expert at maintaining impartiality.

7. It’s important not to have a records management system.  Since you know you are doing it correctly (see 1 above) there is no need to be concerned about later scrutiny. As you have already decided not to have a communications protocol who would keep the files?

8. Get your resellers involved in the program.  Request to see the invoices containing the sales prices of your products. Share how you are conducting the program with other dealers, especially those they may have complained about.  If you see a price you don’t like, tell them about it so they don’t incur the consequences as described in number 3.

Good luck!
-Andrew D’Amico

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