Raising a Glass to Better Pricing Communications

Pricing communications is about using public (aka, legal) communications to advise “constituents” about your pricing intentions.  It is about sending those intentions to three primary groups—customers, competitors and salespeople.  Note that it is not legal to communicate directly with competitors about pricing since it represents collusion in the eyes of the law.  But it is perfectly legal to communicate your intentions in an open channel such as the press–it’s done all the time despite what your overly conservative legal department might say.   By the way, if your legal department does disagree with this point, contact Gene Zelek at Freeborn and Peters in Chicago–he’ll set them straight.

 

In mature markets and bad economic times, your objective should be to achieve a stable competitive environment since price wars will cause sales to drop and profits to disappear.  The way to achieve that is to a) test that your competitor is rational, b) signal to the open market (and that competitor) that you are going to raise or stabalize prices and c) hope that the competitor follows.  If they don’t, it’s usually a good idea to send a shot across their bow by dropping a low price quote to their largest customer knowing that they might have to match it.  Risky?  Sure, but to succeed with pricing in mature markets, you’ve got to take a proactive stance to your communications and pricing tactics to achieve stability.

 

As an example, MedAssets  “help(s) hospitals develop defensible pricing strategies through Web-based technology and consulting solutions that improve profitability and offer pricing transparency for consumers choosing where to spend their health care dollars.”  What they really do is help hospitals develop better pricing communications systems by doing two things.  First, they encourage the hospitals to establish a solid pricing strategy and to make the subsequent prices “transparent”.  That is, the prices have to be fair across all patients so that the patients perceive them as being fair and makes them more likely to select that hospital for a procedure.  This approach reduces price negotiations in both BTB and BTC environments. 

 

 Second, MedAssets shows the hospitals how to justify those prices by communicating about all of the things the hospital does to increase safety and the quality of care, thus positioning the prices as being fair (notice how the word “fair” keeps coming up?).  Finally, though they don’t say this in the article, the communications sends a message to other hospitals that a “bomb them back to the stone ages” price war doesn’t do anybody any good.  Bottom line–MedAssets helps hospitals develop a better pricing communications system resulting in more stable prices.

 

Along these lines, the global consolidation in the brewing industry has helped to stabilize competitive prices for beer in Europe in the United States.  Over the past few days, there has been a foaming series of press announcements from the majore brewers–InBev/Anheuser-Busch, MillerCoors and Heineken to name a few, that they’re all going to raise prices.  The price increase comes despite the declining volume in beer sales (not my fault!) due to the global economic downturn.  It’s an indication of two things.  First that the consolidation in the beer industry is helping to stabilize profits and revenue in the industry.  Second, that the companies that are doing the consolidation have great pricing managers who understand how to leverage pricing power and use great pricing communications to do it.

 

So, next time you’re at the bar bemoaning how hard pricing is in your company, raise a glass to good  pricing firms that have great pricing communications systems to improve profits regardless of what the economic times are.  Don’t worry, you’ll get there some day.  In the mean time, enjoy!