Discounting Control Tool of Choice- The Price Plot
Dec 10, 2016
By Mayuresh Saravanakumar
Last week in my blog post "What Gets Measured Gets Done”, we discussed how important it is to measure pricing data to support insightful decision making. As a continuation of last week’s article, let’s discuss the approach we took for one of our clients - specifically the price plot. We prepared a price plot to understand the overall discounting culture in the organization. While this price plot is very simple, it is very powerful in showing the overall discounting habits of the organization.
Generally, list prices and discounts are associated with volume, and segmenting the data based on volume breaks is a good way to look at discounting. The price plot above shows that the specific business unit is suffering from a discounting culture. All but at one volume band shows discounting used to close business. Once we had this high-level view, we were able to isolate specific transactions that drove the discounting results. In this particular case, we found that the higher realized price was due to a few clients and sales person’s capability, tenure, or selling approach. For the other tiers, we were able to isolate a few accounts that needed immediate review and support from the deal team to rectify the account.
In our experience, many companies are surprised just by looking at this simple graph. They have told us that they have discounting under control and delegations are in place, however when we perform the price plot we see that the data does not align with their internal assumptions. The main insights that can be gained by doing price plots are:
- Understanding the overall discounting culture of the organization.
- Identifying the potential price improvements that the organization can realize
- Uncovering vertical & use case differences in discounting, which may uncover best practices or point out a need to have use case specific price points with adequate fences
- Monitoring progress over time to changes in discounting habits
The price plot should become a part of the overall pricing dashboard and updated frequently to keep report on the organization’s pricing discipline and to provide sales support when needed to correct situations where procurement has ignored the value delivered by the supplying organization
Next week we will discuss pricing & revenue dashboards.