Uncompetitive Product Costs, n.pl.
Great products? Lackluster margins? Underwhelming revenue growth? Maybe your pricing is holding you back. Get a Pricing Diagnostic and break free.
Paul’s Pricing Dictionary: Uncompetitive Product Costs
March 20, 2017 by ·
Uncompetitive Product Costs, n.pl.
Have you ever thought that you might have competitive product costs after all, and that it’s your pricing that sucks? Just saying.
Paul’s Pricing Dictionary: New Product Insanity (NPI)
March 14, 2017 by ·
New Product Insanity, n.
Thinking that your next New Product will fix all your business problems when it has never done so in the past.
Paul’s Pricing Dictionary: Meta Price Analysis
November 28, 2016 by ·
Meta Price Analysis, n.
Analysis which determines how much and what type of price analysis needs to be done.
It’s not how much analysis you do that matters; it’s how little, quick, repeatable and intelligible the analysis is, and most importantly much insight you create in the process:
Meta Price Analysis Value = f {Insight, Speed, Repeatability, Intelligibility / Effort}Paul’s Pricing Dictionary: Big Data
November 16, 2016 by ·
Big Data, n. pl. but s. or pl. in constr., often attrib.
It doesn’t matter how big your data is, it’s how much insight you get from it that counts.
Beginning to See the Light Through the Cloud
November 9, 2016 by ·
Spiceheads enjoying Scale Computing’s on-premise hospitality at Spiceworks 2016 @ScaleComputing #Spiceworld2016
Paul’s Pricing Dictionary: Cost-plus Pricing (Part 2)
November 7, 2016 by ·
Cost-plus pricing, n. gerund, delusional.
Going beyond Nagle & Holden cost-plus prices:
- miss psychological price points
- effectively destabilize the business because they’re set with no perception of customer value in mind (if the prices are set irrationally, customer behavior will be irrational
- assume that all the costs are cost-competitive, right? Wrong.
- temporarily shield uncompetitive procurement/costing/product management
- prevent 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
- are very apparent to professional purchasers & purchasing depts. and can be exploited accordingly
- would be severely lagged and ineffective when used for life-cycle and X-rate 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
October 31, 2016 by ·
Cost-plus pricing, n. gerund, delusional.
-
-
- 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 setâ€
cost = f (volume) = f (price) but if price = f (cost) then you create an infinite loop which can will lead to the wrong solution (flawed circularity or – speaking in engineering rather than tabloid terms – catastrophic)
- 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 = f (allocations) = f (volume) = f (price), and again, if price = f (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.
Paul’s Pricing Dictionary: Remuneration
October 17, 2016 by ·
Remuneration, n. A euphemism for kickbacks, particularly in Big Pharma.
Check out what Big Pharma is giving your doctor for kickbacks. Find Your Doctor’s Payments out of the $7.52 billion/year that gets kicked-back to doctors in the USA.
The first doctor I mentioned this to was fascinated that (a) I knew how much he was getting – which was basically only $500-$1000/year in sandwiches for the people in the office – but he was really excited to find out (b) how much his ex-wife who was a specialist in …. was getting, and he explained exactly why for medical reasons she’d be getting a ton and indeed she was.
Now, another doctor I use got $18,156 in 2013 in mainly “consultancy” from one supplier; the $44,644 in 2014 followed by only $373 in 2015. It makes you wonder what is going on …. and should I be concerned that my doctor’s kickbacks are going down?!? Does it affect the treatment he provides to me? … how much of this is reflected in what I pay my doctor for? Do I pay less or more because of the kickback? Do all patients have the same adjustment to their payments because of his kickbacks?
Another doctor of mine received little in 2013 & 2014 and all of a sudden gets $33K for Associated Research Funding. Am I part of the research? Before I accept any treatment or fulfill a prescription I presumably now need to check to see if his OEM is the company which paid him the $33K. So these kickbacks are certainly doing a good job undermining trust in one’s physicians.
In case you’re wondering why this is relevant to pricing, well, a lot of pricing roles in Big Pharma also include kickback management: Director, Global Pricing & Market Access (Reimbursement Director) – Oncology for Amgen is just one example.
The length of the job description is interesting. To paraphrase Spike Milligan, it should have just said “Director, Pricing & Kickbacks” and saved us (me) the effort of reading it.
What’s the alternative? How about no kick-backs and lower prices?
Do List Prices Matter? The real question is why do execs ask this in the first place? Final installment!
September 26, 2016 by ·
@PaulCharlton of @pricingfactory presenting at - They don’t want you to change list prices;
- They are unsure that they will meet their targets, particularly if you change their list prices; their sales targets may indeed have been set too high, or the revenue and margin may be significantly out-of-balance; it’s highly likely the target setting did not take list price or discount reductions into account;
- They are thinking only about this quarter, and not even beginning to think about trying to set themselves up for success in the following quarter;
- They want more discretion & flexibility in discounting;
- They would like you to leave them alone mainly because they intend to dig themselves out of hole through discounting (which will invariably turn out to be inconsistent and unpredictable);
- They think they can haggle their way out of this by screwing good/friendly/weak customers.
- They are negotiating with you.
