FEATURE | PRICING STRATEGY
GREAT... BUT CAN THEY SELL A PRICE RISE? PETER COLMAN presents the fifth article in his series on behavioural economics in sales management – reacting to biases to grow profits. Here, he focuses on how too many pricing opinions and too few facts mean that a company’s most powerful profit lever is usually poorly managed or not managed at all
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he best thing a salesperson can sell In previous articles I’ve covered a range of topics is a price increase. Pricing is so including incentives, sales strategy and tooling. This important – in fact, it is the most time I’ll turn my attention to how commercial important profit lever. Pricing is leaders need to think about pricing, and how it can one of the most fundamental affect the perceptions of everyone from customers aspects of any business – every and competitors through to their own salesforce. company has to set prices for its products and Here is a list of the six most commonly occurring services. If the world was a rational place, pricing psychological biases when it comes to salespeople’s management would be a core competence of every pricing behaviours. firm, but in reality it almost never is. The beauty of pricing, and price increases in 1. “THEY STARTED IT” particular, for sales leaders is that it all drops straight (ATTRIBUTION BIAS) through to the bottom line. As one recently “Our competitors are so aggressive on price.” remarked to me about her salesforce, “If they can’t In our study mentioned earlier, about half the sell a price increase I don’t want them on my team.” respondents said they were in a price war. When But we know that many asked who started it, 77% salespeople hate even the of those attributed it to a “The best thing a thought of price-related competitor. In other words, salesperson can sell is customer conversations, let “We’re sensible and everyone alone price increases. So it else is a barbarian.” Hear it a price increase. Pricing should be no surprise that in enough and it becomes is so important” my firm’s global pricing and accepted wisdom. sales survey (among 1,925 Just note that those same companies in major industries in over 40 countries competitors are probably saying exactly the same – see tinyurl.com/y2o2nrbw), companies said they thing about you. In our experience, poor price typically achieve only 37% of their price increase management accidently starts a tit-for-tat target (ie. what they get versus what they set). This reaction that can often become a damaging race to means that even if firms are setting increases to the bottom. keep pace with inflation, there is a high chance that In a management meeting I attended, a their prices are going backwards in real terms. recently joined executive asked me to guess why 28 WINNING EDGE
