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The Secret Pricing Teams Can Stop Hiding

Wageningen University and Research in the Netherlands specializes in agricultural research and life sciences. Its libraries include a collection of 1,180 incredibly detailed drawings of root systems done by Univ. Prof. Dr. Erwin Lichtenegger and Univ. Prof. Dr. Lore Kutschera.

These drawings aren’t just an artist’s estimation of how a tree’s roots look. The professors and their students painstakingly excavated the root systems down to the tiniest branchings, taking measurements and making maps as they went. The end results are these scale drawings that show exactly how trees and shrubs look both above and below ground.

Here’s an example that shows a Scotch pine:

As you probably already guessed, we think this drawing offers a good metaphor for pricing. Most of the people in your organization just see the target prices or the pricing range — the equivalent of the tree trunk above the ground.

They don’t understand the breadth and depth of the work that went into creating those prices — which are a lot like the roots of that pine tree.

They might assume that you more or less made those pricing numbers up. Or they might believe that you set prices using a simple percentage on a cost-plus basis and as long as they are getting a certain percentage above costs, the company will do fine. They might even think that they are fully qualified to do your pricing job, or even that they could do it better than you because of their experience in sales negotiations.

The net result of this misunderstanding is that when it comes time to negotiate, they might disregard your recommended pricing or even make up their own price.

That, of course, is a little bit like digging a giant hole next to the tree and destroying a huge swath of the root system. You might not notice the effect for a while, but eventually the tree — or the business — is going to fall.

So how do you avoid this mistake? In the same way that property owners need to be educated about their trees, you need to educate your organization about how pricing works.

No, that doesn’t mean that everyone in your company needs to become a pricing expert. People who own trees don’t need to excavate every root on their property the way those professors did, either. They just need understand that the roots spread out a lot farther than the branches, and that there’s some really complicated stuff going on underground.

In the same way, your co-workers (and especially your sales team) need to understand that pricing involves a lot of complicated stuff that they can’t see. In most cases, a simple introduction to topics like pricing segmentation and value pricing can work wonders.

If you need some help in this regard, check out the following resources:

Lichtenegger and Kutschera uncovered a secret that trees had always kept hidden, and the world is a richer place for it. Don’t let the hard work that the pricing team does be buried where no one can see it.

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