CHAPTER FIVE

PRICING POLICIES

A pricing policy is a company's approach to determining the price at which it offers a good or service
to the market. Pricing policies help companies make sure they remain profitable and give them the
flexibility to price separate products differently

Pricing policy and pricing expectation are important considerations for businesses when determining
the prices of their products or services. Here's a brief overview of these concepts:

5.1. Pricing Policy and Price Expectation

PRICING POLICY
Influencing Customer
Expectations and
Purchase
Behaviors
Meaning of Price Put simply, price is the value placed on a product. To the seller, it is the amount of
money at which he will be willing to exchange his products with 13 buyers. It represents an income to
him. To the buyer, the price is the cost of acquiring a product. It stands for the value a buyer has placed
on a product and which he will pay to the seller in exchange for the product. A price can generally be
said to be the rate of exchange. It is at this rate that buyers and sellers agree to do business that is
mutually beneficial to the two parties. Price in marketing practice goes by many names depending on
the type of product involved and the exchange situation. Generally, goods have prices either fixed or
negotiated between buyers and sellers. For services, price goes by many names. For their services,
lawyers and doctors charge fees. The transporter charges fares for his services to passengers. The
landlord charges his tenants rent for living in his house. The insurance company will ask the assured to
pay premium for its services while banks ask borrowers to pay interest on loans granted to them.
Schools charge students’ fees. Courts charge offenders’ fines. Agents collect commissions from the
clients that they serve. Kidnappers collect ransom from the families of the kidnapped. Citizens pay
taxes to government for public goods/services rendered to them. Husbands pay dowry to the parents of
brides. All the terms mentioned above refer to prices fixed for the exchange relationship between
providers/sellers and users/buyers.

5.2. Policies for Price Negotiation

Price negotiation is the step in the sales process where two or more parties discuss the price of a
product, service, or contract. A key component of commercial transactions, it's used whenever a buyer
disagrees with the seller's asking price or believes there is room for adjustment.

Some key policies that organizations and Marketing managers may have to consider for price
negotiation include:

Pricing strategy: The organization's overall pricing strategy, such as cost-plus pricing, market-based
pricing, or value-based pricing, which informs the approach to price negotiation.

Negotiation authority: Defining who has the authority to negotiate prices and the limits of that
authority, such as maximum or minimum prices, discounts, or concessions that can be offered.

Negotiation process: Establishing a standardized process for conducting price negotiations, including
steps like research, initial offers, counteroffers, and final approval.

Documentation and approval: Requiring thorough documentation of the negotiation process and
obtaining necessary approvals before finalizing any price agreements.

Ethical guidelines: Ensuring that the price negotiation process adheres to ethical principles, such as
honesty, transparency, and fair dealing.

Competitor and market analysis: Regularly monitoring market prices, competitor offerings, and
industry trends to inform the negotiation strategy.

Supplier relationships: Considering the long-term impact on supplier relationships when negotiating
prices, and balancing short-term savings with maintaining productive partnerships.

Negotiation training: Providing training and guidance to employees responsible for price negotiations
to develop their skills and ensure consistency in the organization's approach.
Therefore, By having clearly defined policies for price negotiation, organizations can ensure a more
structured, consistent, and effective approach to securing favourable pricing agreements that align with
their overall business objectives.

5.3. Policies for responding to price objection

Understanding price objections: The client says your price is too high; you respond
When a prospect raises pricing objections, it’s essential to understand their concerns. They may be
facing financial constraints or perceive the price as too high compared to the perceived value.
Your response can transform this common sales objection into an opportunity to highlight the real
value of your product or service.

Exploring the reasons behind price objections

Every time a prospect says, “Your price is too high,” they’re not just commenting on the numbers but
unveiling layers of concerns and perceptions. They may need more convincing of the product’s value
or are comparing it with a cheaper alternative.
Maybe they’re operating under budget constraints or simply testing the waters to see if there’s room
for negotiation.
In some cases, the objection is a mask for other underlying issues – lack of trust in the brand,
uncertainty about the product’s fit for their needs, or even past experiences that color their perception
of value. As a sales maestro, you gently peel back these layers, uncover the core of their hesitation, and
address it with precision and empathy.
Psychological aspects from the customer’s perspective
The psychology behind price objections is a fascinating dance of perception, value, and trust. When a
customer objects to a price, it’s often a reflection of their internal value assessment. They’re weighing
your product against their mental benchmark of what it should cost.
This benchmark is shaped by a myriad of factors – market standards, competitor pricing, personal
budget limits, and the product’s perceived value.
Understanding this psychological play is crucial. It’s about empathizing with their mental model and
gently guiding them towards a new perspective where the price of your product outweighs the price
tag. This journey involves building trust, showcasing the unique benefits of your product, and aligning
it with their specific needs and pain points. In essence, price objections are not just barriers but
opportunities. Opportunities to delve deeper into the customer’s psyche, to understand their needs and
fears, and to build a relationship that goes beyond the transactional.
By mastering this art, you transform from a mere seller to a trusted advisor, a guide who helps the
customer navigate through their doubts towards making a decision that benefits them in the long run.

How to discuss price in the sales process

Discussing price, especially when facing the “your price is too high” objection, is critical to the sales
strategy. It’s about balancing the sticker price with the perceived value, ensuring the customer sees the
long-term value and real benefits.
Sales reps should be prepared with a price objection handling script that empathizes with the
customer’s budget concerns while emphasizing the product’s unique features. Effective
communication is key throughout the sales process, especially after initial discussions about price.
Consistent follow-up through email sequences can keep the conversation going, gently nudging your
prospects towards a decision. Leveraging a tool like Stalemate’s Email Sequence can automate this
process, ensuring timely and relevant communication with your prospects.
5.4. Policies for successfully managing price increase

Managing price increases effectively requires clear strategies and communication to ensure customer
satisfaction and retention. Here are some key policies to consider:

1. Transparent Communication

Advance Notice: Inform customers in advance about the upcoming price changes.

Rationale: Provide clear explanations for the increase, such as rising costs, improved quality, or added
features.

2. Customer Engagement

Feedback Mechanism: Encourage customers to share their thoughts and concerns about the price
increase.

Surveys: Use surveys to gauge customer sentiment and gather insights on their willingness to accept
higher prices.

3. Value Reinforcement

Highlight Benefits: Emphasize the value and benefits customers receive from your product or service.

Testimonials: Use customer testimonials or case studies to reinforce quality and satisfaction.

4. Gradual Increases
Phased Implementation: Implement price increases gradually rather than in one large jump to lessen
the shock.

Limited Time Offers: Consider offering promotions or discounts prior to the price increase to
encourage sales.

5. Loyalty Programs

Rewards for Loyalty: Introduce or enhance loyalty programs to reward existing customers and
encourage repeat business.

Exclusive Offers: Provide exclusive deals or pricing for long-term customers.

6. Competitive Analysis

Market Research: Analyze competitor pricing and market trends to ensure your price remains
competitive.

Benchmarking: Use benchmarking to justify your pricing against similar offerings in the market.

7. Training Staff

Empower Employees: Train customer-facing employees on how to address customer concerns

regarding price increases.

Consistent Messaging: Ensure that all staff communicate a consistent message about the price changes.

8. Monitor Customer Response

Sales Analysis: Monitor changes in sales volume and customer feedback post-increase.

Adjust If Necessary: Be prepared to adjust your pricing strategy based on customer response and
market conditions.

9. Maintain Quality

Quality Assurance: Ensure that the quality of the product or service justifies the increased price.

Continuous Improvement: Focus on ongoing improvements to enhance customer experience.

By implementing these policies, businesses can manage price increases more effectively while
maintaining customer trust and satisfaction.

5.5. Policies for pricing in economic downturn

An economic downturn or recession is " a significant decline in economic activity spread across the
economy, lasting more than a few months . Economies can slow down within a nation, a specific
region or on a global scale.

Effective pricing during a recession includes value-based pricing, discounts, flexible payment terms,
strategic bundling, dynamic pricing, targeted discounts, clear communication, customer retention
programs, cost optimization, and agile pricing strategies.

5.6. Policies for promotional pricing

Promotional pricing policies typically include guidelines and strategies that businesses use to offer
products or services at reduced prices for a limited time.

Promotional pricing is a pricing method where a company temporarily reduces the price of a product
or service in the interest of quickly driving sales. In many cases, those deals and discounts are
supported by dedicated promotional materials or marketing campaigns.

A promotional pricing strategy is one of the best ways to generate quick demand for products or
services. Promotional pricing is a quick-hitting, effective practice that’s best implemented strategically
and in doses. Businesses that constantly undertake large-scale promotional pricing efforts can wind up
excessively cutting into profit margins. It also leads their customers to expect lower prices consistently.

Promotional Pricing Types & Examples

A promotional pricing definition or promotional discount definition covers a wide range of promo
pricing tactics, including:
o Buy one get one free (BOGO) is a promotion strategy used by retailers to encourage
customers to purchase a particular product by offering a second item of the same kind at no
additional cost . In essence, when you buy one item, you receive another identical item for free
or with a discount percentage.
o Coupons. A coupon is a voucher entitling the holder to a discount for a particular product. in
a promotional pricing strategy is a marketing tool that offers customers a discount or special
deal on a product or service.
o A flash sale is a discount or promotion offered by an e-commerce store for a short period of
time . The quantity is limited, which often means the discounts are higher or more significant
than run-of-the-mill promotions. The time limit and limited availability entice consumers to
buy on the spot - aka impulse buying.
o Loyalty Programs. A loyalty program is a rewards program a company offers to its customers
who frequently make purchases.
o Segment-Specific Promotions. An effective promotional pricing example targets certain buyer
segments, such as students, teachers, seniors, or the military. This method involves dividing
customers into different segments based on their purchasing behavior and needs, and then
setting prices accordingly. For example, a company might offer special discounts to customers
who buy in bulk or who have been loyal patrons for a long time.