What if They Find Out?
The question that comes up EVERY time I teach price segmentation:?“What if one customer finds out another got a better price?”??
Think about how you would answer this before I give you the answer.??
Preliminary answer:?It rarely happens.?When is the last time you told anybody how much you paid for something??When is the last time you asked??It just doesn’t happen.?
I’ve been in business for many years and only once was this a problem.?We sold a component to a smaller company at a better price than we sold it to a larger company that bought higher volumes.?When the big company bought the small company, they found out and questioned us.?We said, “Oops, we’re sorry.?We will honor the best price for all of your business.”?
Ok, but I still haven’t answered the question.?What do you do when someone does find out and asks you??The answer is, “They bought something different.”?Maybe they bought when …?
There are a myriad of reasons why one company pays a different price than another.??
My advice, don’t let the fear of one company learning someone else got a better deal stop you from price segmentation.?You’ll be missing out on a huge opportunity.?After all, no two buyers get the same value from your product.??
What other reasons could you provide??Share your comments below.
Now, go make an impact!
Brand Protection - UPP-MAP Enforcement | Price & Sales Analysis
1 年Always keep rationale which proves reasonable. In the US, Robertson-Patman still applies, even if it rarely executed
Profit & Revenue Management - Accelerating Your Pricing Journey!
1 年Mark Stiving, Ph.D. well said. It is like in B2C, we all accept on a flight, that everybody potentially paid a different price. Good segmentation should also lead to price fairnes within a segment. In many of our use cases we see that smallest but "loudest" clients have better prices than some key accounts... (Without good reason) that's a bigger downside than running good customer and price segmentation....
Making Pricing Make Sense (& Cents)?? For B2B Leaders in Manufacturing, Chemicals & Plastics (Commercial Passion & Focus) ?? Advisor & Optimizer (no theory/book - hands on) ?? Thought Leader (on good days) ??
1 年Once they found out. This happened in a previous role. During a merging, company A , the big one, had a less advantageous commercial terms than B, the small fish. The company A claimed with immediate application the pricing conditions of company B, and retroactive effect. A few $100K of profit gone in a few days. Lessons learned, have a justification for a price at any given moment. Feel confident about it. After all, there is a segmentation and business rationales behind it. No reason to be shy about it.
Pricing Research | Customer Insights | Economics
1 年Great advice! Thanks for sharing. I began my pricing career in Yellow Pages (ahem, yes that does date me a bit) where I did a headings-based price segmentation. Since advertisers sometimes advertised in more than one heading, businesses would occasionally question the price difference. Since the marginal cost of a Yellow Pages ad was quite low (and the cost difference between headings was virtually non-existent) we couldn’t justify the difference based on costs. Instead, we focused on the real reason i.e. the value of an impression or a phone call could significantly vary depending on the ad heading. Though this explanation might not have satisfied everyone, I don't recall it becoming a major issue. It also encouraged a dialogue between the sales rep and the customer on the value of the product. (We also offered a discount for advertising in more than one heading, so I'm sure this also helped).
Director & Head of Pricing at ASSA ABLOY Global Solutions
1 年Thanks for sharing Mark. I think that in an ideal world, you as the supplier would have a very solid discount model, which caters to different both customer, market and deal dimensions. If you have confidence in that model, you can almost be completely transparent with your customers. “Yes, you got 23% discount off the list price for this project, and your competitor got more. If you work on this and that metric with us during next year, you could move into the next, higher, discount tier”.