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7 Big Pricing Blunders

When you’re close to a situation, recognizing that you are making a mistake can be very difficult. But from our 10,000-foot-view as observers of the pricing profession, we find it pretty easy to spot missteps. In fact, we often see the same mistakes repeated over and over again.

This insidious thing about these common mistakes is that they seem like minor errors. Simple oversights. But in reality, they often contribute to much deeper issues that create further challenges down the road.

Here are seven of the biggest blunders we see pricing teams make:

  1. Avoiding Bad News – Pricing has deep familiarity with a lot of information that can allow it to be the canary in the marketplace. But that only happens when pricing proactively raises issues. Not only that, you need to go a step further and offer analysis of what caused the issue and potential solutions. Fortunately, while being the bearer of bad news is a tough burden to bear, pricing has the good fortune of rarely being the cause of the bad news — unless you fail to raise an issue. For advice on how to do so effectively, check out Delivering Data to Decision-Makers.
  2. Waiting Until You’re Asked to Show Results – If you’ve been asked to prove the value of the function or show results from your team’s efforts, you have a problem. And it might be too late to correct misperceptions within your organization. Instead of waiting to be asked, stay ahead of any concerns or doubt by monitoring results and presenting them to management. To learn how, see Proving the Value of Pricing.
  3. Not Looking for the Real Root Cause – When teams stop at a default diagnosis of, “Something’s wrong with the pricing,” they never identify and fix the true root-causes of the issues. Instead, they erode their margins further trying to “fix” the symptoms through price reductions, larger discounts, or worse. We cover how to correctly diagnose issues in more depth in Diagnosing Pricing Problems.
  4. Not Understanding How Salespeople Think & Work – Working with salespeople is the most common gripe we hear from pricing teams. Just about every result in pricing relies on the sales team and this dynamic can create a great deal of friction across departments. When the friction starts getting in the way of progress and performance, you have to be proactive and take steps to reduce it. For some strategies to do just that, watch Reducing the Friction Between Sales & Pricing.
  5. Seeing Pricing as a Tactical Function – Many of us in pricing recognize it as a strategic role in the organization. But it’s very easy for others to see it as a tactical function. That can lead to an endless stream of tactical assignments as the team careens from one emergency to the next. Pricing can only live up to its full potential by putting in the necessary effort to play its strategic role and getting others to see it that way. To learn from how other teams have made the switch, check out From Tactical to Strategic Pricing.
  6. Not having influence on Sales Compensation Plans – Revenue-based sales compensation schemes are an ever-present anchor, virtually guaranteeing that pricing and profitability considerations will be an afterthought at best. But with a thoughtful approach, you can change the game, lose the anchor, and reward your salespeople for selling at more profitable prices. You can learn how gain management support and collaborate with sales by watching Revamping Sales Comp to Improve Pricing.
  7. Not Seeing the Full Pricing Process – Every sale your company makes is the result of a process with many intermediate steps. It’s easy to get stuck tweaking or fixing some of those steps and lose sight of the bigger picture. Maybe those steps we’re fixing shouldn’t exist at all. Or maybe if we fixed something else upstream from the problem, the problem would go away. In just about every pricing process, you can achieve huge results with very small tweaks that can yield huge results. Find out how in Pricing Process Improvement

Of course, there are plenty of other mistakes out there. But if you can avoid these seven, you’ll be well on your way to realizing your team’s full potential.

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