Beware the Pricing Myths

In Distribution and Wholesale, pricing decisions make senior managers anxious. They’re tricky to get right, and the stakes are high: it’s difficult to know which prices will attract business without hurting the bottom line, particularly when faced with thousands of customers, hundreds of products, and a wide range of local competitive environments.

Given this complexity, it’s not surprising that so many businesses tell us they struggle with pricing. One executive summed it up neatly: “Although pricing is one of the most basic things we do, it’s also one of the scariest.”

So it’s rare for senior managers to examine their pricing practices to see whether they’re doing all they could for the business. Usually, they aren’t: because although “tried and trusted” pricing rules might seem safe, these rules weren’t designed to cope with the complexity and competitive intensity that characterizes business today. In fact, they may not even have been right to begin with. By sticking to a set of outdated beliefs, or myths, about pricing, many businesses undermine their performance to the tune of millions of dollars a year.

This paper looks at five of the most common pricing myths we hear and explores how, by “busting” them, executives have been able to unlock a powerful and profitable competitive advantage.