Blog

Pricing and Policy Decisions

June 27, 2010 by Dale Furtwengler — President, Furtwengler & Associates, P.C.

How are your policy decisions...

...affecting your ability to get higher prices?

I’m sure that each of you can recall a buying experience so exquisite that you drove out of your way and paid higher prices to gain that experience again and again.  That’s the experience you want your customers to have.  That’s the loyalty you want from your customers.

What isn’t so obvious are all the factors that influence the customer’s experience.  Here are a few of those factors:

• Policy decisions
• Organizational structure
• Compensation programs
• Hiring practices
• Training

It’s counter-intuitive, but pricing is more than quantifying value and establishing a price. Any operating practice you employ has the ability to enhance or diminish the customer experience as well as your ability to gain or maintain premium pricing.  Today, we’re going to look at the policy decision-making process.

How do policies get set in your organization?  Are they established by the business owner or CEO? By senior leadership as a team? Or by senior leaders who have the right to establish policies within their area of operation?  Regardless of how the policies get established here’s a common problem - the policy is reactionary.   Here are a few examples of operating situations we face and the natural reaction to each.

Customer payments slow so we install a “no ship” policy for customers whose receivables are over 60 days old.  We also set our credit and collection people about the task of bringing down the average age of the receivables.

Returns are increasing so we initiate a “no return” policy or tighten an existing policy. But that’s not something we want to publicize, so customers find out after they make the purchase rather than prior to the purchase.

We’ve been providing a free service and now realize that it costs us more than we thought and we being charging for it. Think airline baggage handling and bank service charges.

Each of the examples above happen everyday.  You can tell from the policy that no consideration was given to the impact the policy would have on the customer’s experience.  So what’s the solution?

Establish a policy-making process that looks first at what your company is doing that causes your customers to behave the way they do.  We live in a reciprocal world which means that if your customers are frustrating you, you’re doing something to frustrate them.

When crafting a solution (policy) make sure that serious consideration is given to the question “How will this impact our customers’ experience?”  If it doesn’t enhance the experience, keep searching for a solution that does.

Establish a policy-making group made up of representatives from each of the major operating areas of your company, who also possess a customer orientation.  That may or may not be the senior leader in that area.  The key is to have people who can effectively evaluate the impact a new policy decision will have on their operations and the customer - with greater emphasis being placed on the customer.

For more pricing tips visit http://www.pricingforprofitbook.com.

About Dale Furtwengler

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