Kick the discounting habit: step one for more effective pricing

Abstract

PurposeDiscounting has become the crack cocaine of senior management with terrifying effects on both revenue and profits. The purpose of this paper to show managers how and where to put a stake in the ground to kick the discounting habit and move to a more effective and disciplined approach to pricing.Design/methodology/approachThe author leverages his research on trust in buyer seller relationships with extensive experience with real world pricing to provide insights in why and when discounting is not appropriate and how business can benefit in terms of both profits and revenue growth by adopting more appropriate pricing tactics.FindingsPrior research has shown that more effective pricing can lead to an 11 percent improvement in a firm's profitability. By focusing on eliminating unnecessary discounting, managers can improve profits by more than 20 percent. Specific management tactics are identified which reflect the realities of doing business in today's world of increased competition, product commoditization and sophisticated buyers.Originality/valueProvides insights in why and when discounting is not appropriate and how business can benefit in terms of both profits and revenue growth by adopting more appropriate pricing tactics.