Um...I can see your beanstalk


Price transparency is a growing concern for many businesses. Increasingly sophisticated buyers rely on more reliable price monitoring tools to build rich pictures of market pricing trends. The expansion of ecommerce as a core bu

siness model has exposed many companies’ market pricing and discount strategies. Customers merge, often across geographic or other segment boundaries, expanding their awareness of pricing practices. In short, the natural habitat of the obscure pricing practice is disappearing at a zippy rate.

It’s safe to say that few organizations will cheer on the additional accountability and apples-to-apples competitive comparisons that will come with greater transparency. Still, some organizations may well benefit from it, and find the playing field is leveled a bit. What we can be sure of is this: organizations that don’t prepare will fare much worse than those that do.

So, what can be done to prepare for greater price transparency? The team at Beanstalk wants to share just three of the recommendations we have for forward thinking business leaders who want to stay ahead of the pack.

1. Get your value story straight

Newfound transparency will almost certainly prompt customers to wonder whether they are getting the best deal. Some customers will move beyond simply wondering, and do some shopping around. For those cases, you must be ready to articulate the value your goods or services provide.

Customers pay for value. Generally, customers exchange their money for goods and services which they perceive to have equal or greater value. Don’t overlook the word “perceive”. People perceive value differently (try persuading an iPhone fanatic to switch to an Android device, or vice versa). Consider all possible sources of value, refine the story, tweak it for each customer segment you have, and get ready to tell it well. Make sure you understand how your value proposition stacks up against the competition’s.

2. Be ready to explain your pricing rationale, and be disciplined about sticking to it

Most of us know that the price passengers pay for the same airplane ticket can vary drastically. It bothers me that I can endure all the same discomforts of flying in coach as my seatmate, and still pay more for the privilege. How will your customers react when they learn about the prices others are paying?

Customers will respond better to this kind of transparency if there is acceptable reason behind the differences, and if your organization consistently adheres to that reason. For example, consumers generally accept that buying greater volumes will lower prices. Even in the case of the airlines, travelers have come to accept that buying a last minute ticket, or one that offers a full refund, will probably cost a bit more.

Take time to revisit price policies – the guidelines you should have for how and why you make price decisions. Consider them from your customer’s perspective. Would a reasonable customer accept your pricing practices as consistent and justifiable? Make adjustments as needed.

Now is also a good time to reel in transactional outliers. Make sure that the customers receiving the best pricing are adhering to their commitments, too. If you have long-term contracts in place, you may need several years to regain control, so get started sooner rather than later.

3. Resist the urge to lower prices

Price transparency will produce price pressure. First, a caveat: you may truly find that a price change is warranted. If that decision has arisen from careful deliberation and thorough assessment, then I commend you. However, without such consideration, I would be skeptical that a price reduction would be in your interest.

Remember that lowering your price is the easiest tactic for your competitors to mimic. If you lower your price and your competitor does the same, the gap persists. What’s worse is that this new competition is now focused on a smaller profit pool as the market price point has effectively decreased.

As much as possible, look to create new value, focus more keenly on the segments where your value proposition is strongest, and equip your sales team to sell the value of your company, your products, and your services.

It’s also worth noting that most trends have a maturity curve – people react to the trend strongly at first, and then, as time goes by, they moderate their behavior or opinions. Overreacting to price transparency by lowering price early on might leave you wishing you had held a firmer line once the dust settles. It’s much harder to regain pricing than it is to give it up.

These three tactics are by no means a comprehensive list. Still, we hope that they offer some solid starting points from which to plan out a response to the inescapable impacts that price transparency will have.

In short, most organizations would be prudent to anticipate that their pricing will continue to become more and more transparent to their customers. Leaders are smart to recognize the associated risks, and can effectively manage this trend with sound preparations.

Beanstalk Revenue Management helps companies select and execute strategic marketing and pricing tactics to deliver tangible and sustainable profit gains. We would look forward to learning more about your organization, and discussing whether and how we can support you in achieving your objectives. Learn more at www.beanstalkrm.com or give us a call at 651-356-8148.


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