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All Pricing Experts Can Do This

A proverb usually attributed to the ancient Greek philosopher Socrates says, “The beginning of wisdom is the definition of terms.”

We don’t know if Socrates actually said this or not because he didn’t write anything down himself. And Plato, who wrote down a lot of Socrates’ philosophizing, didn’t include this particular idea in any of his works. But we do know that enough people thought this was a valuable idea that they’ve passed it down for a long, long time.

Ultimately, if you can fully define a concept, you are at least starting to understand it. Conversely, if you can’t explain something, you probably don’t fully grasp it.

Psychology researchers have a term for this phenomenon. It’s called “the protégé effect.” The protégé effect is why good teachers often have their students try to teach a concept to their peers. It’s why surgeons-in-training follow the “see one, do one, teach one rule.” It’s why master tradesmen like plumbers and electricians often require journeymen to explain concepts to apprentices. It’s why racecar drivers study the principles of physics that govern the performance of their vehicles. It’s even one of the theories about why oldest children tend to better on IQ tests than their younger siblings—they have spent their lives learning things well enough to teach them to their little brothers and sisters.

Only when you understand something well enough to define its key concepts for someone else have you attained the most fundamental level of mastery.

This principle is as true for pricing as it is for doctors, plumbers, racecar drivers, ancient Greek philosophers, and every other profession on the planet. The difference is that while doctors, plumbers, and yes, even racecar drivers have formal training, there isn’t a lot of formal training around for pricing professionals. While some of us might have taken some pricing courses in college, there certainly aren’t that many out there with a degree in pricing. And other avenues of instruction are few and far between.

That’s unfortunate because pricing people need to master a lot of concepts:

  • Price segmentation
  • Differential value
  • Price elasticity/sensitivity
  • Pricing power and leverage
  • Trends in buying behavior
  • Structural options for pricing
  • Customer Lifetime Value
  • Price negotiation strategies
  • Pricing analysis techniques
  • Change management best practices
  • Product lifecycle pricing
  • Competitive pricing pressure responses
  • Market mapping, MAP policies & channel pricing
  • Getting buy-in from other departments
  • How to effectively influence the sales team
  • Root-cause diagnosis
  • Effective data presentation
  • Competitive pricing pressure responses

If you’ve spent much time on PricingBrew, you’ve probably heard a little bit about at least some of these concepts (at least we hope so!). But if you don’t understand any of them well enough to define them for your colleagues, it might be time for a refresher course. And naturally, we have a suggestion for how to make that happen.

PricingBrew is here to fill in the gaps created by the lack of formal training for the pricing function. And our Communicating Pricing Concepts webinar is an excellent introduction to all these critical ideas. In addition to explaining the items in the list above, it also outlines how to simplify and illustrate these important concepts to others using real-world data and models. It even explores how to address and counter those preconceived notions that just about everyone in pricing runs into when talking with others.

We hope that in no time you’ll be explaining these concepts to your colleagues—which will be the mark that you have started down the path to pricing wisdom.

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