Mark Stiving

Blog Post
Become a Pricing Champion!
Jan 10, 2018 -

I love pricing. I love the fact that this is a measure of how well a company designs, builds and markets a product. I love the fact that it’s a number. It’s not squishy. I love the fact that you can measure the effects of changes. But what I love most of all is the power pricing has to drive increased profitability. Pricing is amazingly powerful … when there’s a champion. 

Jan 10, 2018 -

I love pricing. I love the fact that this is a measure of how well a company designs, builds and markets a product. I love the fact that it’s a number. It’s not squishy. I love the fact that you can measure the effects of changes. But what I love most of all is the power pricing has to drive increased profitability. Pricing is amazingly powerful … when there’s a champion. 

Blog Post
Failed Price Segmentation (Dynamic Pricing)
Jan 04, 2018 -

According to an article in The Mercury, Village Cinemas in Australia is testing dynamic pricing, and it’s not going well. It has implemented a $1 increase in ticket prices and has increased prices on many concessions after 5 p.m. on Fridays and Saturdays, the busiest times for the movie theaters. 

Jan 04, 2018 -

According to an article in The Mercury, Village Cinemas in Australia is testing dynamic pricing, and it’s not going well. It has implemented a $1 increase in ticket prices and has increased prices on many concessions after 5 p.m. on Fridays and Saturdays, the busiest times for the movie theaters. 

Blog Post
The Goal Is Crucial to Pricing
Dec 19, 2017 -

Sometimes, I have to be reminded of the obvious. Duh! Earlier, I was coaching a company on pricing. As I was listening to descriptions of their customers, their channels and the problems they solve, my mind was swirling with ideas. Let me tell you, these ideas were brilliant. They were amazing … almost.

Dec 19, 2017 -

Sometimes, I have to be reminded of the obvious. Duh! Earlier, I was coaching a company on pricing. As I was listening to descriptions of their customers, their channels and the problems they solve, my mind was swirling with ideas. Let me tell you, these ideas were brilliant. They were amazing … almost.

Blog Post
Should You Use Freemium? Do the Math!
Nov 29, 2017 - Students and readers often ask if they should use a freemium pricing model. In the past, I’ve used the following rules to help with that decision.   Is it a low cost to serve the user? (Usually for software or content.) Can you offer real value to your free users? Is there a segment willing to pay you for more functionality? Does your market have network effects where the value to one user increases the more other users participate? (Think social media or peer-to-peer games.) Jason Lemkin in his blogpost, “Why You Need 50 Million Active Users for Freemium to Actually Work,” points out a fifth. 5. Is the market big enough? Please read his article. It’s brilliant and he lives in this world. Here is the gist. If you want to build a $100M business with a freemium offering that brings in an average of $100/year from the paying customers and you have a 2% conversion rate, then you need 50 million active users. 50 million active users is the exception, not the rule. This is hard to achieve. So you’re thinking, I will get more than a 2% conversion rate. Not likely. When you can find the numbers […]
Nov 29, 2017 - Students and readers often ask if they should use a freemium pricing model. In the past, I’ve used the following rules to help with that decision.   Is it a low cost to serve the user? (Usually for software or content.) Can you offer real value to your free users? Is there a segment willing to pay you for more functionality? Does your market have network effects where the value to one user increases the more other users participate? (Think social media or peer-to-peer games.) Jason Lemkin in his blogpost, “Why You Need 50 Million Active Users for Freemium to Actually Work,” points out a fifth. 5. Is the market big enough? Please read his article. It’s brilliant and he lives in this world. Here is the gist. If you want to build a $100M business with a freemium offering that brings in an average of $100/year from the paying customers and you have a 2% conversion rate, then you need 50 million active users. 50 million active users is the exception, not the rule. This is hard to achieve. So you’re thinking, I will get more than a 2% conversion rate. Not likely. When you can find the numbers […]
Blog Post
Why Do Companies Compete Harder on Black Friday?
Nov 24, 2017 - The easy answer is because there is so much buying going on that day, companies do not want to miss out on their share.  But that doesn’t feel very complete.  Don’t companies care about winning business in March too?  Yet they don’t compete as ferociously in March.  Why not? To be honest, I struggled with this question.  For years I hadn’t had an explanation that felt right yet.  Earlier this year I recorded a podcast with Rebecca called, Prisoner’s Dilemma (and what the heck it has to do with pricing). I won’t go into a review of the prisoner’s dilemma, but here is a quick summary of the outcome.  When companies compete, they each have an individual short term incentive to lower price to steal market share from the others.  However, since the others would probably just lower their price too, nobody wins.  Hence, companies tend to not price aggressively because they know it won’t really help them in the long run.  This is called implicit collusion.  When this breaks down, firms find themselves in price wars which destroy profits for the industry. Rebecca, being the phenomenal podcast host that she is, asked for examples of when this breaks down. […]
Nov 24, 2017 - The easy answer is because there is so much buying going on that day, companies do not want to miss out on their share.  But that doesn’t feel very complete.  Don’t companies care about winning business in March too?  Yet they don’t compete as ferociously in March.  Why not? To be honest, I struggled with this question.  For years I hadn’t had an explanation that felt right yet.  Earlier this year I recorded a podcast with Rebecca called, Prisoner’s Dilemma (and what the heck it has to do with pricing). I won’t go into a review of the prisoner’s dilemma, but here is a quick summary of the outcome.  When companies compete, they each have an individual short term incentive to lower price to steal market share from the others.  However, since the others would probably just lower their price too, nobody wins.  Hence, companies tend to not price aggressively because they know it won’t really help them in the long run.  This is called implicit collusion.  When this breaks down, firms find themselves in price wars which destroy profits for the industry. Rebecca, being the phenomenal podcast host that she is, asked for examples of when this breaks down. […]
Blog Post
A Fantastic Example of Price Segmentation Using Distribution
Nov 15, 2017 -

Everyone who reads this blog knows that we should use price segmentation to capture more from those willing to pay more, yet still win from those only willing to pay less.  

Nov 15, 2017 -

Everyone who reads this blog knows that we should use price segmentation to capture more from those willing to pay more, yet still win from those only willing to pay less.  

Blog Post
What Zillow Can Teach You About Your Pricing Analytics
Nov 07, 2017 -

In a Zillow Porchlight article, Zillow describes (barely) how they calculate the value of a home and how they are trying to become more accurate.

Nov 07, 2017 -

In a Zillow Porchlight article, Zillow describes (barely) how they calculate the value of a home and how they are trying to become more accurate.

Blog Post
American Airlines Deters Competition with Price Strategy
Nov 01, 2017 -

The first two sentences in a Skift.com article titled “American Airlines Plans to Keep Prices Low on Competitive Routes” are: American Airlines Group Inc. will “absolutely, positively” match discount fares from low-cost rivals, chief executive officer Doug Parker said, signaling no end in sight for a price war that has knocked down industry shares this summer. “We price our product to match the competition,” Parker told reporters at a conference in Fort Worth, Texas. “We always have, we always will.” 

Nov 01, 2017 -

The first two sentences in a Skift.com article titled “American Airlines Plans to Keep Prices Low on Competitive Routes” are: American Airlines Group Inc. will “absolutely, positively” match discount fares from low-cost rivals, chief executive officer Doug Parker said, signaling no end in sight for a price war that has knocked down industry shares this summer. “We price our product to match the competition,” Parker told reporters at a conference in Fort Worth, Texas. “We always have, we always will.” 

Blog Post
Surge Pricing and Fairness
Oct 25, 2017 -

Several people have asked me to comment on the recent New York Times article titled “Why Surge Prices Make Us So Mad: What Springsteen, Home Depot and a Nobel Winner Know.” Here goes.

Oct 25, 2017 -

Several people have asked me to comment on the recent New York Times article titled “Why Surge Prices Make Us So Mad: What Springsteen, Home Depot and a Nobel Winner Know.” Here goes.

Blog Post
Did Apple Make a Portfolio Mistake with the iPhone 8/X?
Oct 10, 2017 -

Apple announced both the iPhone 8 and the iPhone X at the same time. Was this a mistake? Time will surely tell, but here are some thoughts from a pricing guy.

Oct 10, 2017 -

Apple announced both the iPhone 8 and the iPhone X at the same time. Was this a mistake? Time will surely tell, but here are some thoughts from a pricing guy.

Blog Post
Ticketmaster’s Verified Fan Gives Economic Surplus to Fans
Oct 04, 2017 -

What do Taylor Swift, Bruce Springsteen and Hamilton on Broadway all have in common? They are using Ticketmaster’s Verified Fan program to keep the scalpers from making a fortune on their events...

Oct 04, 2017 -

What do Taylor Swift, Bruce Springsteen and Hamilton on Broadway all have in common? They are using Ticketmaster’s Verified Fan program to keep the scalpers from making a fortune on their events...

Blog Post
Gross Margin Is Almost Always Irrelevant in Pricing
Sep 29, 2017 -

If you’re a regular reader or a pricing aficionado (aren’t we all?) then you already know that costs are ALMOST always irrelevant to pricing. The single most important driver in pricing is what your buyers are willing to pay. Your buyers don’t care what your product costs to make. They only decide if the value they receive is more than the price you charge.u

Sep 29, 2017 -

If you’re a regular reader or a pricing aficionado (aren’t we all?) then you already know that costs are ALMOST always irrelevant to pricing. The single most important driver in pricing is what your buyers are willing to pay. Your buyers don’t care what your product costs to make. They only decide if the value they receive is more than the price you charge.u

Blog Post
Gouging Is Good, But Not Advised
Sep 21, 2017 -

I recently posted a blog on how some of the airlines were being good corporate citizens and capping the price of their flights from Florida, just before Hurricane Irma. Huge kudos to them. The takeaway of the post was to think about the lifetime value of your customer...

Sep 21, 2017 -

I recently posted a blog on how some of the airlines were being good corporate citizens and capping the price of their flights from Florida, just before Hurricane Irma. Huge kudos to them. The takeaway of the post was to think about the lifetime value of your customer...

Blog Post
Deciphering “Value Range Pricing” in Real Estate
Sep 14, 2017 -

There’s a “new” concept in real estate: Instead of publishing an asking price, you publish a range. For example, instead of listing a house for $349,900, you might list it for $339,900 – $375,000. http://www.realtor.com/advice/sell/what-is-value-range-pricing-real-estate/ To understand this effect, we first have to think about a house with only one asking price...

Sep 14, 2017 -

There’s a “new” concept in real estate: Instead of publishing an asking price, you publish a range. For example, instead of listing a house for $349,900, you might list it for $339,900 – $375,000. http://www.realtor.com/advice/sell/what-is-value-range-pricing-real-estate/ To understand this effect, we first have to think about a house with only one asking price...

Blog Post
Airline Pricing, Hurricane Irma and Fairness
Sep 09, 2017 -

Southern Florida is evacuating.  Most of Florida is evacuating.  My parents as far North as Charleston, South Carolina are evacuating. Hurricane Irma is a big deal.   For many people, their evacuation plans include flying somewhere safe. This could be a windfall for the airlines...

Sep 09, 2017 -

Southern Florida is evacuating.  Most of Florida is evacuating.  My parents as far North as Charleston, South Carolina are evacuating. Hurricane Irma is a big deal.   For many people, their evacuation plans include flying somewhere safe. This could be a windfall for the airlines...

Blog Post
The Power of Corporate Strategy: Amazon and Whole Foods
Aug 28, 2017 - The big news: Amazon will lower prices at Whole Foods on day one. To anyone who spends time watching Amazon, this will not be a surprise. However, it is a great opportunity to learn a lesson: Pricing must be consistent with corporate strategy. Amazon’s corporate strategy is to be the one-stop shop for retail, and a key part of that is to make sure everyone perceives Amazon’s prices as low. Whole Foods, often nicknamed “Whole Paycheck,” is the opposite of that perception. The winner? Amazon’s corporate strategy. The company has announced it is lowering prices at Whole Foods on the day the deal closes. As a pricing guy, I often say that the only good reason for lowering prices is to match competitors’ price decreases. This is an exception. Because Amazon is integrating Whole Foods into its normal business, using the brick and mortar stores to help with delivery and returns and beefing up the grocery business, Whole Foods must conform to the Amazon price brand, and its corporate strategy. An alternative could have been if Amazon wanted to leave Whole Foods as a wholly-owned subsidiary, it could have left prices high and reaped the profits. There were likely some […]
Aug 28, 2017 - The big news: Amazon will lower prices at Whole Foods on day one. To anyone who spends time watching Amazon, this will not be a surprise. However, it is a great opportunity to learn a lesson: Pricing must be consistent with corporate strategy. Amazon’s corporate strategy is to be the one-stop shop for retail, and a key part of that is to make sure everyone perceives Amazon’s prices as low. Whole Foods, often nicknamed “Whole Paycheck,” is the opposite of that perception. The winner? Amazon’s corporate strategy. The company has announced it is lowering prices at Whole Foods on the day the deal closes. As a pricing guy, I often say that the only good reason for lowering prices is to match competitors’ price decreases. This is an exception. Because Amazon is integrating Whole Foods into its normal business, using the brick and mortar stores to help with delivery and returns and beefing up the grocery business, Whole Foods must conform to the Amazon price brand, and its corporate strategy. An alternative could have been if Amazon wanted to leave Whole Foods as a wholly-owned subsidiary, it could have left prices high and reaped the profits. There were likely some […]
Blog Post
A Which One Decision in Action
Aug 16, 2017 - Robert Smith, the owner of a few car dealerships, had an amazing answer on Quora to the question, “How much can a person usually negotiate off of a brand new car?” He doesn’t directly answer the question, but he does describe how to buy a new car. His answer was basically to say to the dealer, “I’m looking at several new cars. Another dealership offered me $100 over invoice, but I like your car better. Will you match the deal?” Of course, ask to see the invoice. (To be fair to Robert he goes into more detail, but this is enough for our pricing lesson.) Why does this work? Because car dealerships are competitive, but mostly because you are making a which one decision. You are deciding which car to buy or even which dealership to go to. And, you are letting the car dealer know that you have other alternatives that are almost as good as theirs. Now let’s assume we own a new car dealership. We are selling a product that has very close competition. Buyers come into our dealership saying they will do the deal at $100 over invoice, so how can we win that business at […]
Aug 16, 2017 - Robert Smith, the owner of a few car dealerships, had an amazing answer on Quora to the question, “How much can a person usually negotiate off of a brand new car?” He doesn’t directly answer the question, but he does describe how to buy a new car. His answer was basically to say to the dealer, “I’m looking at several new cars. Another dealership offered me $100 over invoice, but I like your car better. Will you match the deal?” Of course, ask to see the invoice. (To be fair to Robert he goes into more detail, but this is enough for our pricing lesson.) Why does this work? Because car dealerships are competitive, but mostly because you are making a which one decision. You are deciding which car to buy or even which dealership to go to. And, you are letting the car dealer know that you have other alternatives that are almost as good as theirs. Now let’s assume we own a new car dealership. We are selling a product that has very close competition. Buyers come into our dealership saying they will do the deal at $100 over invoice, so how can we win that business at […]
Blog Post
Buy NOW! The Power of Limited-Time Offers
Jul 26, 2017 - It’s all about FOMO, the fear of missing out. Limited-time offers are common and effective at trade shows. Let’s first put ourselves in the mind of a buyer. The buyer probably only goes to this trade show once a year. He sees something he likes and notices that he can get a big discount if he buys today. He is unlikely to see this vendor again for at least a year, if ever. He decides to purchase. This is true even if he doesn’t really want or need the product right now; he might in the near future. It’s the fear of not finding the deal later that prompts the impulse purchase. I’ve certainly fallen prey to this tactic. I justify it logically saying it’s the best deal I’ll find on this product, even though I may not need it. I purchase it anyway. This also makes sense for the seller. They create a sense of FOMO, usually by setting a high list price on their products and then offering discounts at the right time. They also need to provide a strong incentive to purchase immediately, otherwise the buyer won’t feel FOMO and may not purchase. Let’s look through a […]
Jul 26, 2017 - It’s all about FOMO, the fear of missing out. Limited-time offers are common and effective at trade shows. Let’s first put ourselves in the mind of a buyer. The buyer probably only goes to this trade show once a year. He sees something he likes and notices that he can get a big discount if he buys today. He is unlikely to see this vendor again for at least a year, if ever. He decides to purchase. This is true even if he doesn’t really want or need the product right now; he might in the near future. It’s the fear of not finding the deal later that prompts the impulse purchase. I’ve certainly fallen prey to this tactic. I justify it logically saying it’s the best deal I’ll find on this product, even though I may not need it. I purchase it anyway. This also makes sense for the seller. They create a sense of FOMO, usually by setting a high list price on their products and then offering discounts at the right time. They also need to provide a strong incentive to purchase immediately, otherwise the buyer won’t feel FOMO and may not purchase. Let’s look through a […]
Blog Post
When Discounting Makes Sense
Jun 28, 2017 - Hi Mark, I took the Price class with you in early 2016 and absolutely loved it. I apply what I learned from you about value to everything I do professionally and as a consumer. Being in product management for only a short time, I never grasped the power of pricing; it is now my favorite part of product management. I have a problem on pricing within my company that I have not been able to solve, and I hope you can offer a suggestion. We sell a monthly, subscription-based product. We discount heavily, do not provide packages and do volume discounts. After taking Price, I knew packaging was our answer to effectively end discounting and increase profitability. But here is where it gets tricky: We sell the same product to two very different market segments. The buyer in segment one views us as a will I product, with little price sensitivity. This segment uses the least amount of product features and may only buy one license. They may also sign deals as long as five or six years. The buyer in segment two views us as a which one product, and is price sensitive. This segment uses most of the […]
Jun 28, 2017 - Hi Mark, I took the Price class with you in early 2016 and absolutely loved it. I apply what I learned from you about value to everything I do professionally and as a consumer. Being in product management for only a short time, I never grasped the power of pricing; it is now my favorite part of product management. I have a problem on pricing within my company that I have not been able to solve, and I hope you can offer a suggestion. We sell a monthly, subscription-based product. We discount heavily, do not provide packages and do volume discounts. After taking Price, I knew packaging was our answer to effectively end discounting and increase profitability. But here is where it gets tricky: We sell the same product to two very different market segments. The buyer in segment one views us as a will I product, with little price sensitivity. This segment uses the least amount of product features and may only buy one license. They may also sign deals as long as five or six years. The buyer in segment two views us as a which one product, and is price sensitive. This segment uses most of the […]
Blog Post
Managing a Pricing Portfolio
Jun 01, 2017 - Hi Mark, I’ve been a pricing practitioner for many years now, with experience in several industries on the individual contributor and manager level. It has always allowed me to dive into the business and influence revenue in a positive way by becoming engaged in the business and seeking out opportunities for price/process/strategy improvement. An opportunity is shaping up to move into a pricing director role, with responsibility for several business units. These all operate with their own management, in different markets, with different products and pricing. If this opportunity materializes, I will have less time to dive in and understand the business firsthand, which would be a big change. A portfolio of situations will present itself to me. How do I manage this portfolio? What criteria should I understand about the market and the pricing strategies, processes and results to get a lay of the land? How should I prioritize? Thank you, M Hi M, First, congratulations. Obviously, you’ve done a great job as an individual contributor. You’ve had a chance to implement several pricing techniques. Now things will change. As director of pricing, you are more of a consultant, coach and educator to different departments within your company. In […]
Jun 01, 2017 - Hi Mark, I’ve been a pricing practitioner for many years now, with experience in several industries on the individual contributor and manager level. It has always allowed me to dive into the business and influence revenue in a positive way by becoming engaged in the business and seeking out opportunities for price/process/strategy improvement. An opportunity is shaping up to move into a pricing director role, with responsibility for several business units. These all operate with their own management, in different markets, with different products and pricing. If this opportunity materializes, I will have less time to dive in and understand the business firsthand, which would be a big change. A portfolio of situations will present itself to me. How do I manage this portfolio? What criteria should I understand about the market and the pricing strategies, processes and results to get a lay of the land? How should I prioritize? Thank you, M Hi M, First, congratulations. Obviously, you’ve done a great job as an individual contributor. You’ve had a chance to implement several pricing techniques. Now things will change. As director of pricing, you are more of a consultant, coach and educator to different departments within your company. In […]
Blog Post
Value Conversations in Pricing
May 18, 2017 - Your company has defined and built a product. Your marketing team promotes it. Your sales team is looking for and persuading buyers to become customers. Ideally, this whole process runs smoothly because you started out by listening to the market. But much of the time this isn’t the case. Often companies build products because someone thought it was a good idea. By the way, it might have been a good idea. Regardless of how you got here, now you have a product and some people are buying it. That’s excellent. The question now is are you charging enough? Are you charging too much? This is where a value conversation provides insight into your pricing. The best time to have a value conversation for this purpose is during your win/loss visits. If you won a deal, the customer received more value from your product that your price. Otherwise they wouldn’t have purchased. It is possible they received a LOT more value and there might have been an opportunity to charge more. We should be asking them. Here are a set of questions you might ask: Which of our capabilities was most important to you? How will you use it? What problem […]
May 18, 2017 - Your company has defined and built a product. Your marketing team promotes it. Your sales team is looking for and persuading buyers to become customers. Ideally, this whole process runs smoothly because you started out by listening to the market. But much of the time this isn’t the case. Often companies build products because someone thought it was a good idea. By the way, it might have been a good idea. Regardless of how you got here, now you have a product and some people are buying it. That’s excellent. The question now is are you charging enough? Are you charging too much? This is where a value conversation provides insight into your pricing. The best time to have a value conversation for this purpose is during your win/loss visits. If you won a deal, the customer received more value from your product that your price. Otherwise they wouldn’t have purchased. It is possible they received a LOT more value and there might have been an opportunity to charge more. We should be asking them. Here are a set of questions you might ask: Which of our capabilities was most important to you? How will you use it? What problem […]
Blog Post
Should You Lower Your Price?
May 11, 2017 - My first instinct is that you should not lower your price. Many companies want to lower price thinking they can win more market share. Rarely does this work out well. If you lower your price to win share, what will your competitor do? Probably lower price too. In the end, you won’t gain market share. Instead, you’ll simply reduce profits for both you and your competitor. Yet, sometimes it makes sense to lower price. When your competitor lowers their price you probably need to respond, but respond thoughtfully. After all, if you’re using value-based pricing, you’ve set your price to be some amount higher or lower than your competitor’s in order to capture the differential value. If they lower their price, you will need to lower yours to keep the same relative price position. It’s all about how your customers decide between your product and your competitor’s product. This is a great time to think through your price segmentation. Is it possible to lower your price only on the segment that your competitor serves while not lowering your price on your other segments? This is what the big airlines did when Southwest started flying their routes. They lowered their prices […]
May 11, 2017 - My first instinct is that you should not lower your price. Many companies want to lower price thinking they can win more market share. Rarely does this work out well. If you lower your price to win share, what will your competitor do? Probably lower price too. In the end, you won’t gain market share. Instead, you’ll simply reduce profits for both you and your competitor. Yet, sometimes it makes sense to lower price. When your competitor lowers their price you probably need to respond, but respond thoughtfully. After all, if you’re using value-based pricing, you’ve set your price to be some amount higher or lower than your competitor’s in order to capture the differential value. If they lower their price, you will need to lower yours to keep the same relative price position. It’s all about how your customers decide between your product and your competitor’s product. This is a great time to think through your price segmentation. Is it possible to lower your price only on the segment that your competitor serves while not lowering your price on your other segments? This is what the big airlines did when Southwest started flying their routes. They lowered their prices […]
Blog Post
Can Price Be a Distinctive Competency?
May 04, 2017 - A distinctive competency is something you are really good at and your competition isn’t. Think of this as a unique core competency that you have in the marketplace. It is possible to have more than one distinctive competency, but in my conversations with companies, it’s more common that companies haven’t found or created a distinctive competency. Distinctive competencies are rarely features. Product features are often copied quickly, but distinctive competencies persist for a long time. With that background, can pricing be a distinctive competency? Usually not. Most prices can be copied quickly. However, there are two cases that deserve more inspection. First, what about companies that create new pricing models? For example, when Netflix started renting movies using a monthly subscription model, they changed the pricing model. In some situations, like Netflix, you could argue this could be a distinctive competency. However, other pricing model changes, like the first airline to start charging for checked luggage, are not distinctive competencies. The difference is how easily the price model change can be copied in the market. Second, is low price a distinctive competency? Low price is certainly a brand statement, but the real distinctive competency of companies like Walmart is their […]
May 04, 2017 - A distinctive competency is something you are really good at and your competition isn’t. Think of this as a unique core competency that you have in the marketplace. It is possible to have more than one distinctive competency, but in my conversations with companies, it’s more common that companies haven’t found or created a distinctive competency. Distinctive competencies are rarely features. Product features are often copied quickly, but distinctive competencies persist for a long time. With that background, can pricing be a distinctive competency? Usually not. Most prices can be copied quickly. However, there are two cases that deserve more inspection. First, what about companies that create new pricing models? For example, when Netflix started renting movies using a monthly subscription model, they changed the pricing model. In some situations, like Netflix, you could argue this could be a distinctive competency. However, other pricing model changes, like the first airline to start charging for checked luggage, are not distinctive competencies. The difference is how easily the price model change can be copied in the market. Second, is low price a distinctive competency? Low price is certainly a brand statement, but the real distinctive competency of companies like Walmart is their […]
Blog Post
Premature Pricing: When to Communicate Pricing Information
Apr 26, 2017 - When during the sales cycle should you talk about pricing? The correct answer is “it depends.” It depends on the type of sales cycle or buyer’s journey. It depends on the type of product you sell. It depends on the familiarity of your market with your competitors. However, if there is one guideline on this topic it is this: Communicate price after value is understood. Sometimes they happen simultaneously. Notice that almost all B2C sales situations clearly show the price of the product immediately. In many of these cases consumers already know the value. Imagine shopping for a pair of Levi’s. You already know the brand and the quality. You decide if the price is worth whatever value you think you will get. We also know that price is often a signal of quality. In many B2C situations consumers use price as one of the factors that tells them the quality. Since quality is likely one piece of value, you may interpret this as price is a signal of value. In these situations, consumers are determining value simultaneously with observing price. When selling automobiles to consumers, almost nobody pays the list price. It is a negotiated deal. In this situation, […]
Apr 26, 2017 - When during the sales cycle should you talk about pricing? The correct answer is “it depends.” It depends on the type of sales cycle or buyer’s journey. It depends on the type of product you sell. It depends on the familiarity of your market with your competitors. However, if there is one guideline on this topic it is this: Communicate price after value is understood. Sometimes they happen simultaneously. Notice that almost all B2C sales situations clearly show the price of the product immediately. In many of these cases consumers already know the value. Imagine shopping for a pair of Levi’s. You already know the brand and the quality. You decide if the price is worth whatever value you think you will get. We also know that price is often a signal of quality. In many B2C situations consumers use price as one of the factors that tells them the quality. Since quality is likely one piece of value, you may interpret this as price is a signal of value. In these situations, consumers are determining value simultaneously with observing price. When selling automobiles to consumers, almost nobody pays the list price. It is a negotiated deal. In this situation, […]
Blog Post
Sales and Marketing Alignment – Why is it so hard?
Apr 21, 2017 - CEOs struggle to get their Sales and Marketing teams to work together. It seems simple enough. We all are driving toward the same outcome. Yet there is friction between the Sales and Marketing teams that is either visible or simmering below the surface. Sales has a mission that is clear and visible. They sell stuff and bring money into the company. The Sales team has a quota to hold them accountable for achieving their mission. Sales often believes the only role of Marketing is to support selling efforts. Marketing has many missions ranging from strategic market planning to supporting day-to-day sales efforts. The Marketing team has a wide range of metrics to hold them accountable for their efforts. Marketing doesn’t believe they are short-order cooks for the Sales team. When there is a disconnect between how each group approaches achieving the goals of the business you experience Sales and Marketing misalignment.  Each group understands the definition of success (the business goals). Where the tangle starts is the interpretation of how the goals get accomplished. Sales chooses to take one path to success. Marketing takes a different path. The result is misalignment. Both seek to take the moral high ground. There is great irony when both groups claim […]
Apr 21, 2017 - CEOs struggle to get their Sales and Marketing teams to work together. It seems simple enough. We all are driving toward the same outcome. Yet there is friction between the Sales and Marketing teams that is either visible or simmering below the surface. Sales has a mission that is clear and visible. They sell stuff and bring money into the company. The Sales team has a quota to hold them accountable for achieving their mission. Sales often believes the only role of Marketing is to support selling efforts. Marketing has many missions ranging from strategic market planning to supporting day-to-day sales efforts. The Marketing team has a wide range of metrics to hold them accountable for their efforts. Marketing doesn’t believe they are short-order cooks for the Sales team. When there is a disconnect between how each group approaches achieving the goals of the business you experience Sales and Marketing misalignment.  Each group understands the definition of success (the business goals). Where the tangle starts is the interpretation of how the goals get accomplished. Sales chooses to take one path to success. Marketing takes a different path. The result is misalignment. Both seek to take the moral high ground. There is great irony when both groups claim […]
Blog Post
Price: A Signal of Quality
Aug 08, 2017 - Many buyers use price as a signal of quality, but what does that mean to you if you set price? First,...
Aug 08, 2017 - Many buyers use price as a signal of quality, but what does that mean to you if you set price? First,...
Blog Post
Finances Role In Pricing
Feb 01, 2017 -

Feb 01, 2017 -

Blog Post
Becoming a Pricing Expert
Apr 13, 2017 - A question from a reader: Just to introduce myself, I started my career in a cost consultancy startup that was involved in...
Apr 13, 2017 - A question from a reader: Just to introduce myself, I started my career in a cost consultancy startup that was involved in...
Blog Post
Losing on Price
Mar 16, 2017 - Ask a salesperson why he lost a deal and the answer is often “price.” Let’s stipulate that is true. It is still only half the story. If you attach enough gold bullion to your product, the value would increase to the point where the customer would pay your price. When you lose on price, it really means that you didn’t deliver enough value for the price. Both sides matter. To avoid losing, you can do two things: lower your price or increase the value you deliver. Lowering your price is usually a horrible idea, so how can you increase value? Create more value by improving your product. You can add more capability, more features, more services. However, these additions must be valued by your market or you still won’t win at your price. Talk to your market to be certain what you are adding matters to them. Communicate your value better. You could have the best product in the world, but if your market doesn’t know it, you won’t get paid for it. Communicating value is the responsibility of both marketing and sales. Marketing communicates to a market, sales should be customizing that communication to individual buyers. If you do […]
Mar 16, 2017 - Ask a salesperson why he lost a deal and the answer is often “price.” Let’s stipulate that is true. It is still only half the story. If you attach enough gold bullion to your product, the value would increase to the point where the customer would pay your price. When you lose on price, it really means that you didn’t deliver enough value for the price. Both sides matter. To avoid losing, you can do two things: lower your price or increase the value you deliver. Lowering your price is usually a horrible idea, so how can you increase value? Create more value by improving your product. You can add more capability, more features, more services. However, these additions must be valued by your market or you still won’t win at your price. Talk to your market to be certain what you are adding matters to them. Communicate your value better. You could have the best product in the world, but if your market doesn’t know it, you won’t get paid for it. Communicating value is the responsibility of both marketing and sales. Marketing communicates to a market, sales should be customizing that communication to individual buyers. If you do […]
Blog Post
When You Should Use Cost-Plus Pricing
Mar 08, 2017 -

So many companies use cost-plus pricing. I’d venture to say that almost all hardware companies and services companies with hard direct costs use some form of cost-plus pricing. Yet, pricing people know this is wrong. It leaves money on the table. In the majority of situations, cost-plus pricing makes no sense.

Mar 08, 2017 -

So many companies use cost-plus pricing. I’d venture to say that almost all hardware companies and services companies with hard direct costs use some form of cost-plus pricing. Yet, pricing people know this is wrong. It leaves money on the table. In the majority of situations, cost-plus pricing makes no sense.

Blog Post
All Roadmaps Lead to Pricing
Mar 16, 2015 - This month’s activity of the month is Roadmaps.  You might be wondering how that relates to pricing.  It really depends on...
Mar 16, 2015 - This month’s activity of the month is Roadmaps.  You might be wondering how that relates to pricing.  It really depends on...
Blog Post
The Dollar Store and Subway
Jan 17, 2012 - "In April 2010, Colin Sharp changed the names of his chain of pound shops in Wales from Famous £1 Shop to...
Jan 17, 2012 - "In April 2010, Colin Sharp changed the names of his chain of pound shops in Wales from Famous £1 Shop to...
Blog Post
Pricing is ... Quantitative
Jan 12, 2012 - Hey quant jocks - Pricing is for you!  One of the great things about pricing is we get to play with...
Jan 12, 2012 - Hey quant jocks - Pricing is for you!  One of the great things about pricing is we get to play with...
Article
Why the Product Team Must Own Pricing
Aug 28, 2017 - Who should own pricing? When I ask students this question, it almost always evokes emotion. Some people respond confidently, while others...
Aug 28, 2017 - Who should own pricing? When I ask students this question, it almost always evokes emotion. Some people respond confidently, while others...
Webinar
Distinctive Competencies: Why There's No Such Thing as a Commodity
May 22, 2017 - Distinctive competencies are powerful things, but too many companies fail to recognize their importance or spend the time required to identify...
May 22, 2017 - Distinctive competencies are powerful things, but too many companies fail to recognize their importance or spend the time required to identify...
Article
Kill the Zombies
Jun 03, 2016 - Do some customers still use an old product that you want to get rid of? Have you ever wondered how much...
Jun 03, 2016 - Do some customers still use an old product that you want to get rid of? Have you ever wondered how much...
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