Refocus and avoid the trap of price creep
I recently gave my staff the task of asking themselves if they’ve fallen into any of these traps when setting their pricing: “things just get more expensive;” “these are the common tactics, discount this and charge for that—it’s the same for everyone;” “if we do not charge them, someone else will;” or “we are still a better deal.” Every one of these is just a lazy statement and a killer of our model and intentions. Goals for disruption cannot abide lazy thinking or acceptance of norms from the outside.
The credit unions we serve are no less susceptible to the dangers of sloppy or lazy thinking when it comes to setting pricing and competing with other financial institutions. Are you talking with your staff about how you set real value for your community? Read the four fallacies below and ask yourself if you’ve fallen into the trap.
“Things just get more expensive!”
My message to staff: NOT TRUE. New companies come along every day and change the expectations of apples to apples, and pretty soon you are selling oranges at a high price. Buyers simply overbuy and accept what you sell as value adds for more money. Stay on the point – make sure you pricing is not bundling unnecessary stuff to justify lazy pricing. “Do no harm” means do not oversell and do not let people be fooled by bundling things off the track of success for you or them. More is not better if more has nothing to do with a return.
“These are the common tactics, discount this and charge for that—it’s the same for everyone.”
My message to staff: Do not set de-facto pricing by being on auto-pilot. We have a price sheet – the credits we grant CUs are based on their thinking, not our credit habits. We discount to “invest” in the CU’s game plans. We want the CU to target these investments and tell us how they wish to use the funds. If they do not have a plan, then we should charge rack rate and invest for them. Push them to think about how they would use the funds; we discount to invest, not just to win deals. Applying mutual creativity is the key to us treating them as individuals and earning their respect for buying into their agenda. Invest so they win, do not just discount so you can win a sale!
“If we do not charge them, someone else will.”
My message to staff: BS, and I would rather someone else live with a bad deal delivered. Short term gains are not worth it if in the mid-to-long term the client loses for being sold the wrong thing. If we cannot be disruptive (in price, access, or shared execution) then we might not be the right ingredient for a win, and a sale might risk being the worse thing we can do. We are second and third to market for a reason. We want to sell products that contribute to the long game; there are few premiums for CUs in being first. The true premium for CUs is being vested and trusted in solutions that evolve, and solutions priced so CUs can make a return.
“We are still a better deal.”
My message to staff: I hear my parents reminding me that two wrongs do not make a right. Test yourself. Being slightly worse than the worst is not an answer for long term success. Find a better way to declare our value than to compare ourselves to others.
It’s 2018 – resolve to be more than we were last year and prove it by avoiding lazy traps. Pricing and its justification can be one of the biggest areas for lazy thinking. Do not get caught.
Tell me why I’m wrong.