Just When You Thought You'd Heard Them All: Top Ten Lies of Pressure Pricing

JUST when you thought you'd heard them all… One of the most frequently requested items from our pricing seminars is a list we call The Top 10 Lies of pressure pricing. It's a list created several years ago from a survey of purchasing managers who were asked what devices they regularly employed in order to obtain a better price from suppliers. For the most part, the entries are self-explanatory. A few, such as "Employing a shill", may need a word of explanation. The term "shill" comes from the shell-game con, one of the oldest around. The shill is the confederate of the con artist whose job it is to "volunteer" to play the first game, which he or she promptly wins. In the world of purchasing, the "shill" is a bidder who helps the buyer to obtain a better price. The shill is not necessarily a confederate of the buyer, but nevertheless plays a key role because the buyer knows that this supplier will provide an aggressive price. The buyer, however, has no intention of buying from the "shill". The buyer simply uses the low price as a lever for obtaining a better price from a supplier they prefer to do business with. "Imposing time pressure", number two on our list, is a favourite tactic of some purchasing managers. It takes advantage by forcing a quick decision from sales reps without allowing them to refer to management. It's one reason so many companies believe that the sales force needs to have price discretion. It's also one reason we wonder how many times this kind of pressure is real, or simply imposed. Not long ago, we heard the story of a seasoned sales rep who was being pressured by a customer to give him a price "right away" if he wanted to get the deal. The sales rep resisted giving an immediate response but offered to get back to the customer the next day. On the way out of the meeting the sales rep turned to his junior colleague and told him exactly what price he was going to quote. The junior colleague asked why he hadn't told the customer the price in the meeting if he already knew what it would be. The sales rep said, "I don't want him thinking that he can pressure me for a price. He has to learn that pricing is not something we can develop on the spur of the moment." There's another good reason for taking time. A quickly quoted price has the appearance of an ill-considered price. It becomes more difficult to defend on the basis of value.

Top Ten Lies of Pressure Pricing

1.        Creating an atmosphere of aggressive competition

2.        Imposing time pressure

3.        Threatening to take the business elsewhere (or implying the threat)

4.        Employing a shill

5.        Claiming a lack of flexibility

6.        "Putting down" the selling firm

7.        Making excessive demands

8.        Claiming limited authority

9.        Threatening to move the negotiations up to the seller's boss (or implying the threat)

10.     Running the "good cop-bad cop" routine