Price Pressure | Fact or Fiction?

In the summer of 2008, right before the economy crashed, author and marketing guru Seth Godin declared there was no such thing as price pressure.

He went on to say, if you're experiencing price pressure, it's a message from the customer you're not delivering sufficient value for the price you're charging.

You're not selling a commodity unless you want to, he asserts.

Fast forward to 2011 ...

Bob Chapman, Sandler sales coach, begins hearing price-pressure concerns from business owners, manufacturers, distributors, sales people and professionals. Almost without exception, they're feeling pressured to:
  • Bid for contracts and projects
  • Cut margins and reduce prices
  • Promise (and deliver) more at a lower price
These observations struck a chord, since I, too, have been hearing similar comments from clients, colleagues and partner companies.

Are you experiencing the same thing? What do you think: Is price pressure fact? Fiction? Or a figment of imagination?

Take our survey (right sidebar) and share your comments, experiences and questions.

In the coming weeks, we'll discuss what the survey reveals and provide some practical tips for protecting both your price and profits, as you deliver on your promises to your customer.

UPDATE
The online survey is concluded ... for now. To learn about the varied forms of price pressure and practical tips for countering it to protect your profitability, read our white paper, Price Pressure | Is it Hurting Your Bottom Line?

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Related
Price Pressure series

4 comments:

Charlie Puissegur said...

I believe a general condition of over capacity for many products and services exists today, and to the extent one's products and services are in the group of those which have an unfavorable supply/demand ratio (which itself has a range of severity) the pressure will be greater.

What has not changed is the normal product life cycle and its associated margin phenomena. New products that are eagerly sought after by the market place tend to have better margins than those approaching the end of their life. It is the nature of the thing that mature products tend to become commodities, and margins shrink.

It is also true that organizations that find methods to solve real business problems for their customers using their respective products and services may enjoy much greater margins if the problem they solve has an identifiable and measurable value that is perceived by the customer.

In any case I believe the margin discussion has more to do with some combination of these things than an across the board percentage pressure due to today’s economy.

Example:

If you have a product at the end of its life cycle with little particular perceived value, you will most likely be under price pressure 100% of the time.

If on the other hand, you have a new product that solves a very real business problem with a clearly defined and agreed upon value, your price pressure will most likely be much less.

A similar argument, with some obvious changes, could be constructed to consumer products.

Doug Borchers said...

When you say "this economy" you need to further define the stage. In the early stages of "this economy", price pressures were tremendous... companies still had their full staff of buyers and specifiers, who were suddenly not overwhelmed with filling production schedules or running around with their hair on fire trying to solve daily problems. So they had time to evaluate... and evaluate they did -- the worst period of price pressures I've seen in 25 yrs. Every item scrutinized with 5 yr buying histories, alternate supplier quotes, and demanded price reductions and extended datings.

But 6 to 9 months later as layoffs occurred, those heavy price pressures began to slow back down to normal levels. Currently price pressures are surprisingly low even in the face of rising commodity costs, I think mostly due to the fact that while companies are getting busy again, they're doing it with less staff, whose number one job is to get materials in so they can get end product out the door.

So -- even though "this economy" still isn't ideal, price pressures have subsided from a couple years ago.

Barbara said...

Doug, Charlie:

Your comments and examples provide some real insights.

Did I complicate the survey by including the phrase "in this economy?" Would it be more useful to focus solely on price pressure?

Barbara said...

UPDATE: Bob Chapman has some comments he wants to share, but his computer went kafluie. He should be back online by Thursday, so continue to check back.

For now, we've extended the survey timeframe.

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