Even under relatively stable conditions, the force of entropy is constantly pulling our pricing processes and systems ever more “out of tune” over time. But when there’s increased turmoil and uncertainty in the market, this degradation tends to accelerate and things can get very sloppy, very quickly.
As a result, even the best run pricing functions can discover that they’ve sprung some costly margin leaks while their time and attention has been focused elsewhere.
We discuss this phenomenon in the “Closing Your Most Costly Margin Leaks” webinar. In this recorded session, we highlight how and why things shake loose even with the best of intentions; and we explore a number of the most significant margin leaks that other teams have discovered, including:
- Strategic Priorities Getting Fuzzy Or Going Out the Window
In periods of turmoil and uncertainty, it’s very easy to lose sight of strategic priorities. In most cases, it’s an unintentional slide as people blur the lines and definitions, little by little, over time. It could be, however, that the former priorities are actually no longer relevant or ideal in light of dramatic changes in the marketplace. In any case, strategic decisions and prioritizations should be deliberate and thoughtful, rather than random or reactionary. - Consistency in Price Execution Processes Deteriorating
It’s challenging enough to get sales reps to stick to the pricing guidance and policies under normal market conditions. But when market conditions get a bit more sketchy, it seems that everyone involved…including managers and analysts…begins to waffle and rationalize all sorts of deviations from the established pricing rules and processes. Here again, while some of these deviations might be valid and warranted, they shouldn’t be happening in an ad hoc or random fashion. - Big Accounts Becoming More Underpriced With Each Increase
To cover cost fluctuations on various fronts, many teams have had to roll out multiple price increases over a relatively short period of time. Trying to protect their big accounts, sales reps will often go for a just portion of the needed increase. And as reps continue dampen each subsequent increase, these big accounts become more and more underpriced. Of course, these tiny deficits and shortfalls can really add up. - The Bid Desk Losing Alignment With the Rest of the Business
Given the nature of the task at hand, it’s easy for a Bid Desk function to become somewhat insular and myopic. And when they’re only looking at and comparing deals inside that Bid Disk bubble, it can become a sort of self-fulfilling, self-referencing, slippery slope. This can lead to an ever-widening and completely unintentional disconnect between the pricing dynamics of the Bid Desk and the pricing dynamics everywhere else. - Value Messages Devolving Into Just Price and Availability
Given the supply chain issues we’ve seen in almost every sector, it’s no surprise that price and availability are major concerns for almost every buyer. The problem is that many Sales and Marketing teams have begun to message as though price and availability are the ONLY concerns. No matter the market condition, differential value messages can positively influence buyers’ perceptions and preferences.
Keep in mind that these margin leaks are by no means mutually exclusive. You can definitely be suffering from more than one at the same time. In fact, if you find that you have leaks in one area; the odds are pretty high that you’ve sprung some leaks in other areas as well, because the causal dynamics behind the leaks are all very similar.
Now, this article only touches on a sampling of the margin leaks that may have sprung up in your business while you weren’t looking. It’s not intended to be a comprehensive list, as the particulars aren’t really the point.
The point is that with the way the markets have been, it’s a near certainty that at least some aspects of your pricing have gotten sloppy…and it’s costing you. And while it’s not hard to fix these leaks, you do have to be deliberate about tracking them down.
Closing Costly Margin Leaks
In this recorded webinar session, we explore common margin leaks that can appear when the economy is roiling, your business is under intense pressure, and everyone has been scrambling to deal with the chaos.
Diagnosing Pricing Problems
When companies stop at a default diagnosis of, “Something’s wrong with the pricing,” they never identify and fix the true root-causes of the issues. In this on-demand webinar, learn how to identify the real root-causes behind pricing performance issues.
Assessing Your Pricing Capabilities
While you might think your pricing capabilities are pretty good, how do you really know? How can you tell? In this on-demand webinar, learn how to leverage "3 P" assessments to figure out where you're at and where you need to improve.
