Among the interesting sessions here at the European Association of Directory Publishers’ annual congress here in Athens, I thought I’d share a few takeaways from a presentation regarding pricing strategy. The speaker was Mark Billige of Simon-Kucher & Partners. The issue of pricing also came up in some subsequent presentations, in particular a talk given by Müller Medien CEO Michael Oschmann on creating efficiencies through sales force automation.
Billige gave the audience some food for thought on achieving price elasticity in their directory products and encouraged the group to move beyond making “back room” pricing decisions. Moreover, he acknowledged that discounting is very much engrained in the culture of the sales process, but suggested smarter discounting. For instance, providing discounts for rewarding customer behavior such as on-time or upfront payment. Billige’s research indicates that those advertisers receiving the highest discounts are most likely to churn. For instance, advertisers receiving 50 percent-plus discounts have a 35 percent churn rate. So, the argument of “If I didn’t give them the discount we would have lost them” is, per his research, not the best or most accurate defense.
Billige also made the case for better tools for sales reps, which was highlighted in the Oschmann presentation noted above. Oschmann’s reps at Müller Medien now all carry tablet PCs, which enables them to have advertisers sign contracts on the spot on the PC, move ad copy and alter a current ad design on the fly, update content and the like. However, in the context of pricing and commission, the sales reps can see through the software package immediately what their commission will be from the sale. Therefore, if they decide to give a discount, they can see what that action will do to their take on the sale. The idea is that it is a motivating factor to not discount or discount as heavily.
Here are a few additional takeaways from the Billige presentation:
- Establish an environment that requires thoughtful price strategy, price setting and price implementation.
- Embrace price differentiation, but make it scientific, not gut-based.
- Use smarter discounts.
- Use tools that will help show/measure pricing consequences — i.e., sales force automation tools that instantly show the sales reps their commission based on the discount given. This in itself can be a motivator.
- Get the sales team involved from the start and get buy-in on pricing decisions.