Which pricing problem do you have?

Pricing is not one problem. It is at least three, depending on whether prices are negotiated customer by customer, posted for the customer to take or leave, or set at the shelf by a retailer between you and the shopper. 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. There are at least three main situations:

• Negotiated pricing. A salesperson agrees a price, a discount or a rebate customer by customer. The questions that matter are the list price and what is given away from it, who can give it away, and 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 rather than 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 the retailer is paid in terms, what promotional money buys, whether the annual negotiation is yours to run, and whether the business can see what it actually nets by customer and product once every off-invoice payment is counted.

So the check comes in versions, one per situation, and 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, and 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 is knowing the nearest competitive benchmarks, the premium your offer earns against them, 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 are primary demand rather than share, 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 not leakage but overreach.
• A regulated market. Price is the level that regulators, customers and suppliers accept as fair. The questions are benchmarks from other countries and industries, the value customers place on the service, the full cost of supplying it including reinvestment, the return on capital, and 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. But read your profile against it. A Basic 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.