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The 5 Unspoken Rules of Pricing

Every society has its own unwritten rules that people generally follow without speaking about them. For example, in the US, there’s an unspoken rule that when you get in an elevator, you should turn around and face the door while the elevator is going up. If you’re attending an American wedding, you shouldn’t wear white unless you’re the bride. If you’re driving in a car and you pass a field of cows, someone in the car has to say, “Cows.”

Other cultures have unwritten rules of their own. In France, you should arrive to social events a little late. In China, you should not cross your legs while sitting down. In India, you should stand as close as possible to the person in front of you in line, but in Sweden, you should leave several feet of space.

As its own unique subculture, pricing has some unwritten rules as well. Here are a few we highly recommend following:

  1. Care About More Than Just Higher Prices. Sometimes pricing gets a reputation for being focused on high prices at the expense of everything else. Sales teams, in particular, often make this criticism — and it isn’t always undeserved. By focusing on profitable growth —not just higher prices — you can find new opportunities to boost the top and bottom line. This approach lets you put your data analysis expertise to use in new ways, and it also makes it easier to get along with your co-workers. We cover this idea in greater detail in There’s More to Profit Than Price and Focus on Profitable Growth, Not Higher Prices.
  2. You Need to Make Space for Strategy. For pricers, it’s very easy to get mired in a tactical mindset. After all, that’s the role that so many in the organization expect pricing to take. Plus, you have so many daily tasks thrown your way that you probably barely have time for lunch, let alone big picture thinking. The net result is that strategic work always gets put off until next week, next month, next quarter, next year. To counter that tendency, you need to make a plan and carve out the time to become more strategic. It won’t happen on its own. Learn how in Developing a Winning Roadmap for Pricing Success
  3. Remember the Best Solution Is the One You Can Actually Accomplish. Of course a “best practice” would be ideal, but oftentimes, reaching that ideal requires far too much change and internal effort. If something isn’t achievable, it isn’t really “best” for your situation. Instead, aim for what you can realistically accomplish within the constraints that you have. Remember that minor improvements can be meaningful. Pricing has so much power that even small steps in the right direction can deliver impressive results. Check out ‘Better’ Practices for Pricing Improvement to learn more.
  4. Start Small. The effort and risk for a new pricing initiative can feel daunting. What if it doesn’t work? What if you can’t get others on-board? The secret weapon that successful pricing teams have discovered is to start small and prove things out. A wholesale change can require monumental effort, expense, and risk. But a pilot program allows you to make progress while also providing the space to make mistakes, test concepts, and figure out what works. Pricing Pilot Programs explains how to get started.
  5. Find the Root Causes.Pricing is rarely to blame for pricing problems. But that doesn’t stop anyone from pointing their finger at pricing when things go wrong. In reality, pricing issues are often a symptom of larger issues. If you want to protect the business and your group’s reputation, you’re going to have to find — and fix — the true root causes. We cover how to do that in Diagnosing Pricing Problems.

These unwritten pricing rules haven’t caught on quite as much as some of the unwritten cultural rules we mentioned — especially that cows thing. But these have far bigger consequences in the long run.

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