Preparing for Greater Price Transparency

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 business 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 is 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? Below are three starting recommendations for forward thinking business leaders who want to stay ahead of the pack.

1. Get your value story straight

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.

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. 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 or in the case of airline tickets, buying a last minute ticket will probably cost a bit more.

Take time to revisit price policies: would a reasonable customer accept your pricing practices as consistent and justifiable? 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 as well.

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.

Diana Zuzek is President and CEO of Beanstalk Revenue Management.

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