Customer Reviews

Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table

5 star:		(13)
4 star:		(3)
3 star:		(0)
2 star:		(0)
1 star:		(0)

 

 

I liked this book a lot. I thought it was well outlined and well written. The book's overall message is that the small business owner should link prices to the value delivered. The reader should be able to optimize pricing for her services or products after considering the 10 rules of pricing presented in this book:

1. Generally, don't let the customer talk you down in price
2. Price your service or product at a level that a customer is willing to pay if they understand the value of your service or product
3. Know which of three pricing strategies you are using and stick to it
4. It's OK to negotiate price with customers, but make sure you win
5. It's OK to lower prices, but only in order to increase profits
6. Expand your offerings so you aren't locked into one price for one product
7. Great pricing will often force your competition to react to your pricing
8. Your company's sales force has to be expert at why and how you priced your services or products
9. Set prices based on value - not on cost-plus
10. Always keep in mind you are in business to make a profit without leaving money on the table

I loved the instruction that the author provides regarding how an owner of a small business has to be willing (and able) to fire unprofitable clients and customers. Business people who compete on price are playing a fool's game. Smart business owners understand that value is the basis for business exchange and that to be successful at business one must FULLY understand value. This book puts forth a pretty good effort to help the reader fully understand value, or at least how to go about fully understanding value after doing a little investigation and research of the market.

Pricing goods and/or services is far from simple. And setting an optimal price is one of the most difficult decisions to make when starting a business. Furthermore, as a business grows and matures pricing at an optimal level continues to be difficult. Prices never stay the same because demand never stays the same. To do this well one must know the market (competitors & customers), know the costs, know the perceived value, and know the actual value.

Getting a handle on all this is not particularly easy. This is especially true because customers are often times very hard to figure out. Some are price buyers, some are value buyers, some are relationship buyers, and some are poker-playing buyers. Knowing these four types of buyers is a heads up for the small business person. But he or she still has to read the customer and figure out which one of these four the customer is before negotiations can be performed in favor of the seller. Read this book and start on your path of being a better pricer of your services or goods. 5 stars!

The American writer Alfred Kazin remarked that "One writes to make a home for oneself, on paper, in time and in other's minds."

Well, Reed Holden certainly has had a place in my mind since I first read him back in October 1998. His book, co-authored with Thomas T. Nagle, The Strategy and Tactics of Pricing (STP) is a seminal work, adorning the bookshelves of anyone who takes pricing seriously. With this influential book, Holden and Nagle are probably more responsible than any other individuals for putting pricing on the organizational charts of companies around the world.

I was fortunate enough to receive an advance copy of Reed Holden and Mark Burton's new book, Pricing With Confidence, spending a couple of days after the New Year absorbing its many lessons. Of course, there is no possible way to do justice to this work in such a short space, so instead I will simply share with you some of the more brilliant insights that struck me like a thunderbolt.

In addition to a brief synopsis of the Ten Rules of Engagement, the Introduction starts out with a discussion of the pricing death spiral, a never-ending process whereby the buyer continuously gets the seller to offer more and deeper discounts. A process, the authors teach, with no winners, only survivors. The Ten Rules offered in the book are effective strategies to counter this trap--along with capturing more of the value a company creates.

The Introduction also contains a discussion on "What Is Your Pricing Purpose?" offering this advice: "In Reality, pricing is far from simple. Setting the optimum price is one of the most difficult decisions managers ever make."

Amen. This statement recognizes that pricing is not a science, it is an art; but it's also a skill, meaning the more we do it, the better we get. The authors also suggest that the highest purpose of pricing is to increase profits.

The summary of Rule Two proffers this sage advice: "You can't have confidence in your pricing until you have confidence in the financial value that your offerings create for customers. Even though many managers are convinced they can't get this information, the reality is that most of your customers are eager to tell you. All it takes is asking the right questions and being willing to listen."

Yet how many firms truly understand this? It's much easier to sit around and lament the fact that what they sell is increasingly a "commodity," complaining about the procurement process, and whining that customers simply don't understand the value they create. But that's the cowardly way out, shifting blame and responsibility onto others.

If companies themselves don't take responsibility for comprehending, communicating, creating, convincing and capturing value, who will? How can you change something if you don't accept responsibility for the underlying causes?

The discount habit--what they label discount creep--is usually the result of either selling to customers who don't value what is offered, or a wrong customer to begin with--as they write, "the price isn't wrong; the customer is."

Rule Four identifies four types of customers: price buyers, value buyers, relationship buyers, and a group they call poker-playing buyers. The chapter goes on to discuss strategies--honed by real-world experience--on how to deal with each type that are worth the price of admission.

Lest anyone accuse me of writing a hagiographic review, I don't agree with everything in this book, a source of endless exchanges of emails between Reed and myself.

My biggest disagreement is with Rule Nine: "Take Simple Steps to Move From Cost-Plus to Value-Based Pricing." It's not that I disagree with the necessity of an incremental approach--since the cultural change required for any company to move to real Value Pricing is massive--it by necessity must be incremental.

My issue is with this statement: "There is nothing wrong with cost-plus pricing as long as it does a good job of leveraging the financial value you create for customers." Yet, it's highly unlikely that cost-plus pricing does this, except by coincidence.

My worry with this statement is that some leaders will use it as an excuse to delay, or put off entirely, making the transition to VP. Replacing cost-plus theory with value-based theory is hard enough without some people clinging to any last vestige of the proprietary of the old model, especially from someone as prominent as Reed Holden.

But then they write: "An important point about cost-plus pricing is that most organizations are comfortable with it," all I can say is a lot of people are comfortable being fat, but that doesn't make it optimal. I also reject their notion that "If an organization sharpens the quality of its costing data, it is always in a superior position." And "Applying incremental costing produces what we call value-enhanced cost-plus pricing." Huh? That's a enhanced contradiction in terms--like jumbo shrimp.

But becoming more accurate cost accountants isn't going to make a company become better pricers. Toyota doesn't even use a standard cost accounting system, but rather a process they call target costing.

These technical disagreements aside, they take nothing away from this work--a fantastic book that should be read by anyone who considers themselves serious about creating and capturing value through better pricing. Reed and Mark have created another permanent home in my mind with this work.

Often books written by pricing consultants look at situations and tell the reader "what is possible". Many of these books should have a disclaimer saying "consultants not included" since many times the only way to get results is by hiring consultants.

While those books are rich on methodologies, analyses and frameworks, they are poor on answering the question "So what should I do first thing tomorrow?" That is where Pricing With Confidence comes in.

Reed Holden, one of the pricing community's thought leaders has authored a new book along with Mark Burton, co-founder of Reed's new consulting organization, Holden Advisors. General Managers and people in pricing functions will find this book valuable for several reasons.

First, the authors offer, as they say, ten ways to stop leaving money on the table. Second, the suggestions are immediately actionable without consultants. Third, they will bolster your confidence that, with some intestinal fortitude, change is possible.

The book chapters are devoted to each of the ten ways to stop leaving money on the table. The writing is down-to-earth and easy to read (and, even more important, easy to understand). For those readers who may want to skim the book, they would be well advised to read the introduction that contains an excellent summary of the ten chapters.

This book deserves bookshelf space for people who want to find ways to improve their company's financial performance and are willing to make the necessary incremental changes. There is no silver bullet or magic in Pricing With Confidence. It is a straightforward book that proves, once again, that 80% of success is just showing up (and doing a few things right.)

The book offers a key advice to managers: understand the full value of your offering before you negotiate on price. I teach Pricing at Thunderbird, Global School of Management and do highly recommend this book.

Reed Holden and Mark Burton's Pricing with Confidence makes the complex topic of pricing strategy understandable and usable to businesses of all industries and sizes. Many of the examples are easily transferrable from one industry to the next. Their approach is logical and rational and can be adapted to a sole proprietor with an entrepreneurial idea to the largest of companies. The only thing, I severely disliked about the book was the poker analogy which runs throughout the book. Business, unlike poker, is not a zero-sum game. I understand the analogy they are trying to make, but, in my opinion, it detracts from the overall value of the ideas presented, hence the four stars.

Pricing with confidence

I have heard Reed Holden speak in a number of venues. I was happy to hear he was contemplating a book on the practical end of the spectrum for a selling organization. This endeavor revolves around easily understood concepts that a selling organization can apply.

Reed constantly says "Don't be a victim", apparently a phrase he learned many years ago, which ties in with the thrust of the project. Don't be satisfied with what the market place gives you. You can price your product and the services you offer at a level consistent with the value you bring. Far from just cheerleading, you must have done your homework before hand and this will give you the confidence to overcome the objections you will receive.

In the book are simple methods to organize your thoughts to understand your value, which may change with different classes of trade. You can then set your price points and defend them successfully. If you are not successful there is a unique chapter to characterize the type of buyer you are facing. Price buyers, Value buyers, Relationship buyers, and Poker Playing buyers all have different agendas and your defense of your value may be valid, but not successful with each of the above types. Just the recognition of this is valuable to the salesman and may point to different strategies or more importantly not confusing strategies.

In my organization I know the publication is making a difference when a proposed price point strategy is being justified by a thought process described in the book. The sales person in the meeting is defending his stance among his peers who can be rather harsh to test his logic.

A good read that should be placed on the shelf for extensive use as a reference book.

As a practioner of pricing for a major firm, I have had the great fortune to directly benefit from the wisdom of Reed Holden and Mark Burton as both a client and student of theirs over the past several years. The benefit to my knowledge and understanding of the pricing discipline, and my company's ultimate benefit from implementation of this knowledge has been one of the best investments we could have made.

Reed and Mark have assembled their vast knowledge and experience into this enormously useful book, which is one of the easiest reads I have ever come accross. I can't overstate the importance of the style in which this book was written, as it flows far more naturally and provides greater comprehension than even the "...For Dummies" tomes. Their concise, easy to use approach does not underestimate the task at hand for practitioners of their pricing principles. However, they do an outstanding job of separating the noise from the true core pricing issues that managers need to devote their ever scarce resources to in their quest to improve their company's profitability.

Through their academic and professional lives, Reed and Mark have compiled the credentials to become experts in the field of pricing, and have supported those credentials in the only manner that counts - with successful solutions for their clients. With this book, anyone with even the smallest interest in pricing as a discipline can develop measurably better approaches for their businesses.

The title matches the content inside of the book; you really will learn how to price with confidence. It is excellent for a company or corporation with salespeople as is often referred to in the text. There is lots of useful information on setting prices for your product or service, although the author doesn't tell you what to charge, that is entirely up to the company. As a small business person, it didn't suit my needs, but if I owned a large company with salespeople, I would use this book for sure.

I have worked in the pricing space for over 10 years. I believe this book does a very good job of capturing the main principles of good pricing in a way that can be easily digested and acted upon by the reader. I am one who agrees that pricing is just one of several parameters of an offering to a customer. You can't just tackle pricing independently without looking at the other value parameters of your offering. I think Holden and Burton do a great job of putting pricing issues in their proper perspective in this book. Too many times I have seen people and companies set out to fix a pricing problem without considering the context of their overall market offering. You have to understand your target customer. The authors do a good job integrating other key strategic considerations in the discussion on pricing.

Obviously different industries have different pricing and marketing challenges, so what works for one may not be the best tool for another. The topics discussed in this book I believe are more appropriate for most B2B industries.

I believe the authors are "spot on" in the cost-plus discussion. There are pros and cons of cost-plus. What is important is not whether cost plus is good or bad, but that we understand why and how it might be so. Excellent discussion on this topic.

As a forum leader for a group of CEOs of small, growing businesses, we used this book to help us in understanding whether the pricing strategies each of our businesses used were optimizing their market and sales successes. Since many of these small companies compete with some of the largest players in their respective industries, it was revealing to each of them to see their realities detailed so clearly by the authors. It has led each of them to engage in more thinking and analysis relative to a pricing strategy that matches their value offering. This is a must read for any small business up against the big guys.