When Sales suggest this they’re wanting to not only maximize their flexibility but also avoid scrutiny of their sales performance. Sales will throw in the word “competitive” as a pre-emptive strike/warning/threat to the product group: don’t complain about my discounting, and I will not complain that your products aren’t cost competitive. You stay on your side of the fence, and I’ll stay on mine.
Nevertheless I – as a pricing person – want list and discount because I will make sure the list prices are positioned correctly v. the competition – and you can hold me accountable to that – but I do need to be able to measure the discounting results to assess (a) how good the discounting policy is (or not), (b) how good was Sales’s discounting performance (or not), so (c) I can work out how to optimize End-to-End Pricing to improve business outcomes. So when Sales make this statement “All I need is a competitive net price to the customer”; it is a red flag. Just like the question “Do list prices matter?”
This stand-off (if you can call it that) is institutionalized by the way that most high tech companies are organized and responsibilities assigned: product groups responsible for the list price, product cost and pricing strategy, with – in a completely separate management chain – the sales regions responsible for discounting, closing deals and sales comp. So the end result is that typically there is no line-of-sight for end-to-end pricing. And while businesses are organized like this, their customers’ purchasing departments are taking full advantage of their suppliers’ pricing dysfunctionality …. every day.
More to follow.
Thank you Howard Davis of @Contextworld! Once again, great question!
