Smarter Pricing: How to capture more value in your market

Pricing that brings unsatisfactory behaviour

The pricing strategy adopted by a company can effectively train its customers to behave in negative and unprofitable ways. For example, Thomas T. Nagle and George E. Cressman (2002) criticize business-to-business companies operating reactive pricing processes. Without formal pricing structures and strict criteria for discounts, they allow price negotiation as long as deals meet some minimum profit level. The intention is to be flexible and responsive to changing market dynamics. The result can be expensive. Regular customers soon learn that aggressive negotiating achieves larger and more frequent discounts. Smart buyers institute policies that drive deeper discounts – requiring salespeople to deal ...