Paul’s Pricing Dictionary: High List (Price), High Discount

P 75x75High List (Price), High Discount, n. technical, obsolete.

How to undermine your investment in your branding and devalue your own value prop with a few carelessly chosen words, like “80% discount”.

Paul’s Pricing Dictionary: Price Floor (2)

P 75x75Price Floor (2), n. a tell.

A red flag when requested by a rep. It’s a flaming red flag when requested by a rep before they’ve even engaged with the customer. It’s a flaming red flag on fire when it’s requested by someone claiming to to be a “sales strategist”.

Paul’s Pricing Dictionary: Price Floor

P 75x75Price Floor, n. technical. 1) The deal price at which you no longer need a Sales Rep; 2) The deal price which, if you did all deals at, you would no longer need a Sales Department.

Paul’s Pricing Dictionary: Disruptive Pricing

P 75x75Disruptive pricing, n. gerund, aspirational.

When striving for consistent and predictable outcomes just won’t do. Get your disruptive pricing in first, before the opposition does.

Paul’s Pricing Dictionary: Cost-plus Pricing (Part 2)

P 75x75Cost-plus pricing, n. gerund, delusional.

So going beyond Part 1 … cost-plus pricing:

– misses psychological price points

– effectively destabilizes the business because the list prices are set with no perception of customer value in mind (if the prices are set irrationally, customer behavior will be irrational)

– assumes that all the costs are cost-competitive, right? Wrong.

– temporarily shields uncompetitive product management, product engineering, procurement and product costing from economic reality

– prevents the necessary and creative tension between pricing (“these products are not cost competitive!”) and costing/procurement (“oh yes they are!”) to help improve the business as whole

– is very apparent to professional purchasers & purchasing depts. and can be exploited accordingly

– would be severely lagged and ineffective when used for product life-cycle management

– can be easily gamed by the competition: it’s very obvious when a company doesn’t set its price competitively

– wait, don’t tell me that with cost-plus pricing you don’t even bother with competitive analysis either ….?

Paul’s Pricing Dictionary: Cost-plus Pricing

P 75x75Cost-plus pricing, n. gerund, delusional.
  1. From “The Strategy & Tactics of Pricing” Nagle & Holden, 2nd edition (1987 & 1995):

Cost-plus Pricing:

– “carries an aura of financial prudence”

– “blueprint for mediocre financial performance”

– “impossible to determine product’s cost before a price has been set”

cost = ƒ(volume) = ƒ(price) but if price = ƒ(cost) then you create an infinite loop which can will lead to the wrong solution (“flawed circularity”)

– creates a catastrophic cycle of a decline when competition increases: volumes decline, then overheads allocated to the products will increase leading to increased prices, which in turn will drive volumes down, increases overheads …. etc

2. Cost-plus pricing assumes costs are accurate, which is rarely the case, and, in reality, there is no good way of defining – let alone allocating – overheads:

cost = ƒ(allocations) = ƒ(volume) = ƒ(price), and again, if price = ƒ(cost) then you create an infinite loop which can will lead to the wrong solution (“flawed circularity” or – again, speaking in engineering rather than tabloid terms – catastrophic)

3. Sub-optimized pricing. Every price created by cost-plus pricing is either too high or too low. Every price could and should be improved.

Previously thought to be archaic but apparently in wider use than originally thought.

CRAPIDO® – a more shiny, polished and digestible Responsibility Assignment Matrix.

CRAPIDO® is a superior Responsibility Assignment Matrix to help you manage your businesses processes more efficiently and effectively. It has more roles, and specifically more useful roles than other RAMS such as RACI and RAPID®, and, as such, it can form a key component of your Business Process Documentation. Here’s a mock-up of what the end result from using CRAPIDO® could look like:

CRAPIDO® is a more complete, practical and usable Responsibility Assignment Matrix than any other that has been published so far. Well, I would say that wouldn’t I? It’s easy to use and for some reason, a lot more fun to use than the other RAMs. But what else makes it better?

CRAPIDO® makes your RAM more digestible ….

There’s some other subtle stuff that you can do with your RAM:

  1. Don’t use primary colors: use a less alarming, more soothing, tonal palette. Remember, the more your execs get paid, the more easily spooked they are by bright, shiny and quite frankly shouty colors.
  2. Make sure the text in your column headers is horizontal. Don’t use vertically rotated text just to squeeze lots of columns in. There are reasons why our eyes are side-by-side.
  3. Use an “interesting” font but nothing too wacky. Remember that the ability of an executive to absorb information in an unfamiliar font is inversely proportional their job level in the organization.

I could give you an example of bad practice here but frankly I’m not going to visually pollute this post with some of the stuff I’ve had to endure in the past. But you have to imagine, column headers with vertically rotated text in primary colors and, yes, Arial font. But there again, if you want to disguise your content and/or try and dissuade anyone from even reviewing your content even if they want to, that’s an excellent way to do it.

Using a consistent taxonomy for your Process Attributes will make your life easier.

Here are some examples of Process Attributes that you could be using – or some variant of this – to consistently define the dimensions of your processes.

  • Hint: one way to leverage this is to create a global process with a minimal number of variants.
  • Wink: Pick your best-selling product, your best-selling upgrade, and your best-selling service as three product standards, with (again) the minimum numbers of variants for everything else.
  • Nudge: use the taxonomy to re-cycle Process Attributes and save yourself from having to reinvent parameters for your each of your processes from scratch.

So what will CRAPIDO® not help you avoid?

  1. It will not help you avoid is taking the initiative and putting the effort into to documenting your processes. CRAPIDO® will make it easier, but at the end of the day it will require some initiative and effort on your part.
  2. You will need to keep your processes up-to-date particularly to reflect organizational changes and major product launches. Include process updates as a standard part of your strategy & policy updating process. If you like, have a process for updating processes ….. keep on top of it. You’ll surprise yourself – and Internal Audit – when you do.
  3. The next problem is simply missing or overlooking a process which delivers a key competitive advantage. Can you imagine that you’re not doing something which could deliver a key competitive advantage? No? Have you ever asked yourself the question? Is the competition doing something that you’re not? You should. You really, really should.
  4. Once you’ve done this, don’t stop. There is more to do, much more, specifically ensuring that all your processes are complete, integrated, synchronized and then optimized. Well let’s ask the question. Are all your processes complete? Fully integrated? Synchronized? And optimized? Of course not. Check out my End-to-End-Pricing paper published by the Professional Pricing Society.

Finally, and most importantly, for some unknown reason, CRAPIDO® makes assigning roles & responsibilities somehow more digestible, less painful and more fun than it would be otherwise. Now, can you say that about any other Responsibility Assignment Matrix!?! I thought not. CRAPIDO® – for the Crap You Do!

You’re welcome.


Copyright © 2018 The Pricing Factory®.
CRAPIDO® is a registered trademark belonging to The Pricing Factory®.
RAPID® is a registered trademark belonging to Bain and Company

CRAPIDO® – a brand new Responsibility Assignment Matrix

Empty interior with wooden floor and grunge wallDo you know how pricing works in your organization? Do you know who is meant to be doing what? Do you know what your involvement in it is? Do you know where to find these things out? In many organizations pricing isn’t clearly defined and, even if it is documented, it’s done badly. Here I’d like to introduce CRAPIDO® as a key component to help you design and build pricing processes to achieve your business goals through more consistent and predictable outcomes. That of course is the polite way of saying it.

What is CRAPIDO®?

CRAPIDO® is a more complete, practical and usable Responsibility Assignment Matrix (RAM). It can be used to clearly define roles and responsibilities in pricing or indeed any other business process. Without an effective RAM, you’ll find a business is inefficient, ineffective and dysfunctional. And the people in them, under-performing and frustrated. Designing and documenting your business processes is an essential first step on the path to improve the way your business performs.

What is Business Process Documentation?

  1. A Responsibility Assignment Matrix (RAM) – this is who gets to decide what, who does the hard work, who has to be informed, etc. etc. This where CRAPIDO® comes in.
  2. Document the steps in your process in the form of a Business Process Flow-chart.
  3. A list of Job Responsibilities by Job Function – which is an abstraction from (1) & (2). This is so you can sit down with someone and say, this is how and when you are/are not involved in these processes, and let me tell you why.
  4. A Business Process Architecture of all your processes which outlines how they intersect and interrelate. This is so you can show folks how stuff fits together to enable them to envisage a complete picture.
  5. And you also need: a Process for Updating Processes and
  6. A Process for Updating Architectures. You need to be able to show that your processes and architectures are open to improvement, responsive to feedback, and adaptable to organizational changes.

So what exactly is CRAPIDO®?

CRAPIDO® is a more complete, practical and usable Responsibility Assignment Matrix than any other that has been been published. Well, I would say that wouldn’t I? It has a complete suite of roles, it’s easy to use and for some reason, a lot more fun to use than the other RAMs.

So what’s wrong with existing Responsibility Assignment Matrices?

The basic problem with other Responsibility Assignment Matrices (RAM) is that they simply do not have enough roles: most have four or five, CRAPIDO® has seven. Count them. Seven. And while I am a great believer in less is more, this is not one of those cases. RAMs with four or five roles are at least two or three sandwiches short of a picnic.

Having had to use RACI & RAPID® extensively – only because they were the corporate standard – I found them extremely frustrating. From my perspective of defining pricing roles and responsibilities, they are limited and incomplete. CRAPIDO® has been specifically designed to eliminate those frustrations.

RACI misses out on Agree, Perform and Out-of-the-loop. All rather essential elements, particularly in pricing.

RAPID® critically misses out Informed and Out-of-the-loop. Informed is part of RACI, PACSI, RASCI, RASI, RACIQ, RACI-VS, CAIRO, DACI & RATSI but somehow does not make it into RAPID®. This particularly problematic for pricing where communication of pricing decisions – both internally and externally – is crucial.

PACSI lacks a Recommender; RASCI is a bit kumbaya but nevertheless slightly improved version of RACI; RATSI misses out the Agree and Out-of-Loop roles and also doesn’t have a clearly called out role for Recommend. But one thing they all have in common: insufficient roles. RACI-VS comes closest with six roles but is really only suited for very bureaucratic or structured environments. Those extra roles are Verifier and Signatory, neither of which is really needed in business.

CAIRO is strangely the only other RAM which includes Out-of-the-Loop but still manages to be incomplete. Out-of-the-Loop is not just some crap I made up. Out-of-the-Loop is the opposite of In-the-Loop in case you’re unclear. If you’re in THE pricing meeting, you’re “In-the-Loop”. If you’re out of THE pricing meeting, then you’re “Out-of-the-Loop”. Really. Oh, and if your pricing meetings aren’t that vital, maybe you should put some effort in to making them that vital (before your competitors make theirs more vital than yours).

So what does CRAPIDO® look like?

Well, here it is in all its technicolor glory. Who gets to do what by job function, by process.

All told, it’s small, but I hope you’ll agree, perfectly formed.

It’s all agreed, documented and then parked on an internal website. Now no-one can claim that they don’t know what the process is, how to get involved, what their role is. It should be reviewed at least annually with quarterly opportunities to modify if required. All disagreements on who should be doing what will dissipate to a distant memory.

The real skill is making sure you have have an agreed philosophy for the allocation of decision-making responsibilities, the right processes defined (the rows), and, oh yes, and use Out-of-the-Loop to take out groups or individuals who don’t add value and slow the process down. O!

So there you have it: CRAPIDO®

Finally, and most importantly, for some unknown reason, CRAPIDO® makes assigning roles & responsibilities somehow more digestible, less painful and more fun than it would be otherwise. Now, can you say that about any other Responsibility Assignment Matrix!?! I thought not.

CRAPIDO® – well, let’s just say it and get it out there – for the Crap You Do!

You’re welcome.


Copyright © 2018 The Pricing Factory®.
CRAPIDO® is a registered trademark belonging to The Pricing Factory®.
RAPID® is a registered trademark belonging to Bain and Company

Paul’s Pricing Puzzle Part 3: Can You Guess When This Business Had Its Pricing Mojo?

No? Not surprising really because it’s never had its pricing mojo. Bit of a trick question there. But do you see how the revenue . just .. slowly … trails …. off ….. like ….. a ……

Sorry! Dozed off there completely. But this is what your revenue will look like if you do not pay attention to pricing!

I think they always knew they had a problem but they just didn’t want to admit that their replacement of the company’s core product was technologically obsolete by the time it was launched. This was exacerbated by senior execs – I’m using the term “senior” very loosely at this point – longing for the old days of “proper computing”. Whatever that was. I think the last time we had “proper computing” was when there was a British Empire, Morris Minors, 8″ floppies, before The Cuckoo’s Egg, that sort of thing.

But out of all the problems they had, I bet they never once considered that part of their problem was that their pricing strategy was continually undermining the business. It wasn’t just the obsolete technology, the lack of backward compatibility, the disintegration of their application ecosystem, their failure to modernize their GTM mechanism, the collapse of their support model due to using much more reliable components, virtualization, hyper-converged infrastructure, the cloud, the rise of OEMs … It was also pricing. All the time, it was pricing.

If you’ve never got your pricing mojo working, if you’ve never experienced the thrill of crushing the competition because your pricing is just so on top of it …. then get a real expert in. Someone who actually knows what they are doing.

Better Call Paul 281-782-9821

Paul’s Pricing Puzzle Part 2: Can You Guess When This Business Implemented an Enterprise-wide Revenue Management, Profitability & Pricing System?

No? Not surprising really because neither can they. “System” is one word for it; “tool” is another.

Don’t waste your time and money implementing a pricing system without knowing what you’re really doing.

Get a real expert in. Someone who actually knows what they are doing.

Do you want to see what their competition was doing? Sure you do …

Just make sure it doesn’t happen to you.

Better Call Paul 281-782-9821 Ask for a conflict check sooner than, well, before you end up like Competitor #1.

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