Rob Doctors, lead author of the book, Contextual Pricing: The Death of List Price and the New Market Reality was my guest on the Business901 Podcast. Rob believes that pricing decisions need to be driven by customer context rather than simple list prices. Pricing is more than just an issue of margin and production costs, but rather a complex set of contextually factors best defined as an outcome. In the podcast, we discussed the outcome of four contextual factors:
- Situation
- Objectives
- Perception
- Capabilities
An excerpt from the podcast:
Joe: If I need to change my pricing structure and look at contextual pricing, what would be the compelling reason for me to go that direction, right now?
Rob: Better margins in a nutshell. Because, think about it, once you’ve set a list price, the traditional way of doing it. It’s really tough for anyone in your organization to sell above that list price. I’ve set a list price on, whatever, my plastic clam shells for holding food in a supermarket. The next moment a customer runs in saying "Rush order, rush order, I desperately need clam shells. I’ll pay you a million dollars per clam shell!" You look in your book and you say "I’m sorry. I can only charge you $0.30 for this clamshell because that’s our list price." You immediately cut off the benefits by setting a list price.
Download Podcast: Click and choose options: Download Here or go to the Business901 iTunes Store.
P.S. We had a little trouble with the audio so this is not the norm. We will publish the transcription next week.
Related Information:
The Other Half of the Lean and Sales Marketing Summit
How Lucky are you with Pricing?
Contextual Pricing Book Review
My Engagement Strategy – Appreciative Inquiry