Which pricing problem do you have?

Pricing is not one problem but at least three. Prices are negotiated customer by customer, or posted for the customer to take or leave. Or a retailer between you and the shopper sets them at the shelf.

The market structure you price in changes the answers again: competitive, concentrated or regulated. A useful assessment knows which situation it is looking at, and reads the practices in that light.

Three pricing situations

A check built for one situation will misread the others. Pricing falls into at least three main situations:

• Negotiated pricing. A salesperson agrees a price, a discount or a rebate customer by customer. The questions that matter: the list price and what is given away from it. Who can give it away. Whether the money buys anything back.

• Posted pricing. The business sets the price the customer pays, and the customer takes it or leaves it. The questions are price points and pack architecture, promotions and markdowns, and whether any of it is tested or copied from last year.

• Selling through the trade. A brand owner's product reaches the shopper through retailers or distributors that set the final shelf price. The questions are different again.

  What is the retailer paid in terms? What does promotional money buy? Is the annual negotiation yours to run? Can the business see what it nets by customer and product, once every off-invoice payment is counted?

So the check comes in one version per situation. A question at the start routes you to the right one.

The market you price in

The same practices mean different things in different markets. A reading of your profile takes the market into account.

• A competitive market. Price is the market price plus a position you choose. What matters: the nearest competitive benchmarks and the premium your offer earns against them. Then how customers and competitors react when you move, and your own cost floor. The price-setting and price-getting practices carry most of the weight.
• A market with few players, or one. Price is the level that does not invite a regulator or a new entrant. The questions start with primary demand, ahead of share. Then how satisfied customers are at each price level, which price levels encourage entry, and how costs will evolve. The strategy and governance practices carry the weight, because the risk is overreach more than leakage.
• A regulated market. Price is the level that regulators, customers and suppliers accept as fair. The questions start with benchmarks from other countries and industries, and the value customers place on the service. Then the full cost of supplying it, including reinvestment, and the return on capital. Then how the regulator will behave under different pricing policies. The data and evidence practices carry the weight, because you price by making a case.

The check does not ask which market you are in, and does not need to. Read your profile against it anyway. A low score on discount authority is a problem in a competitive market and less of an issue in a regulated one.

What to do with this

Take the version of the check that matches how you sell. Then read the profile against the market you sell into, and weight the dimensions accordingly. If two of your businesses sit in different situations, answer for one at a time. The average of a negotiated business and a trade business describes neither.

What is a pricing maturity assessment? explains what the check measures and what you get back. The Stages of Excellence in pricing describes the five stages across the five dimensions.