PRICING WITH CONFIDENCE

10 Ways To Stop Leaving Money On The Table

AUTHOR: Reed K. Holden And Mark R. Burton

PUBLISHER: John Wiley & Sons, Inc.
DATE OF PUBLICATION: 2008
201 pages
FEATURES OF THE BOOK
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Pricing with Confidence is a road map for senior leaders in sales,

marketing, finance, and pricing. It is organized into ten rules
designed to help senior leaders tackle the habit of discounting, deal
with a wide range of customers, discover the value that their
company offers and defend that value in price negotiations. Pricing
gurus Reed K. Holden and Mark L. Burton offer practical step by
step processes as well as extensive charts, diagrams, anecdotes
and case studies to illustrate the ten ways to stop leaving money
on the table.
THE BIG IDEA
Pricing With Confidence by Reed K. Holden and Mark R. Burton

In Pricing with Confidence, Reed K. Holden and Mark

R. Burton explore the rules of engagement that put
companies back in the driver’s seat during price
negotiations
INTRODUCTION
Pricing With Confidence by Reed K. Holden and Mark R. Burton

In Pricing with Confidence, Reed K. Holden and Mark R. Burton

offer ten rules of engagement that put companies back in the driver’s
seat during price negotiations. Their solution builds revenues and
profits without lowering prices and gives everyone in the organization
the confidence to stand up to competitors and naysayers. The key is
linking price to the value provided. By discovering and understanding
the value they create for their customers, companies can defend
their prices, stand out against competition and capture the money
that they used to leave on the table.
RULE ONE: REPLACE THE DISCOUNTING HABIT
WITH A LITTLE ARROGANCE
Pricing With Confidence by Reed K. Holden and Mark R. Burton

In Rule One, Holden and Burton urge managers and salespeople

to change how they approach conversations with customers.
Instead of talking about price, they suggest starting the
conversation with value. Holden and Burton implore companies to
stop the habit of discounting and replace it with unwavering
confidence in the value of their product. By replacing the habit of
discounting with a little arrogance, companies will develop the
backbone to demand payback for the value they create for their
customers.
RULE TWO: UNDERSTAND THE VALUE YOU
OFFER TO YOUR CUSTOMER
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Holden and Burton present the following step by step process for
understanding customer value:

Data Discovery: Plot all data into a data file and understand what
it reflects about the customers.

Internal Interviews: Talk with sales, marketing, and service

executives within the company.

Customer Value Profiles: Develop an initial hypothesis about

how customers use the company’s products or services and how
they get value from that use.
RULE TWO: UNDERSTAND THE VALUE YOU
OFFER TO YOUR CUSTOMER
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Customer Interviews: Use customer interviews to validate and/or

discredit the internal analysis and develop new value profiles as
needed.

Business Value Models: Map out how customers make a profit

and how the company’s offerings help in that process.

ROI Tool and Value Propositions: Create a series of strong

value propositions that salespeople can use and a number of
qualifying questions to determine if there is a need for the
company’s offering.
RULE THREE: APPLY ONE OF THREE SIMPLE
PRICING STRATEGIES
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Holden and Burton offer three simple pricing strategies

to choose from.

Skim Pricing Strategy: Prices are set high relative to

the competitor’s. This strategy is used to maximize
revenues coming from the high end of the market.

Neutral Pricing Strategy: Prices are set close to the

competitor’s. This strategy is important for companies
who want to take the focus off the price of a product.

Penetration Pricing Strategy: Prices are set low

compared to the competitor’s. The objective of this
strategy is to make price a major factor in the purchase
decision.
RULE FOUR: PLAY BETTER POKER WITH
CUSTOMERS
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Once a company chooses a pricing strategy, it is important to craft

the right customer approaches so they do not waste time or leave
money on the table. In Rule Four, Holden and Burton identify four
main types of customers:

Price Buyers: Customers who buy only based on price. They do

not care about bells and whistles.

Value Buyers: Customers who buy based on the company’s ability

to improve their finances. These customers regularly evaluate the
value of the company’s product as well as the value of their
competitor’s products.
RULE FOUR: PLAY BETTER POKER WITH
CUSTOMERS
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Relationship Buyers: Customers who rely on strong relationships

with suppliers. They view the company as their partner and trust
that they are offering the best solutions and services.

Poker-Playing Buyers: Customers who love to play the pricing

game. They know suppliers will do just about anything to get their
business.
RULE FIVE: PRICE TO INCREASE PROFITS
Pricing With Confidence by Reed K. Holden and Mark R. Burton

The most important purpose of price is to improve profits. According

to Holden and Burton, one of the most destructive myths of
business is that if companies grow the top line by increasing sales,
then profits will take care of themselves. The problem with this myth
is that it encourages managers to lower prices for the sake of
increasing sales. Similarly, this approach causes salespeople to
leave profits on the table to close sales.
RULE FIVE: PRICE TO INCREASE PROFITS
Pricing With Confidence by Reed K. Holden and Mark R. Burton

In order for managers and salespeople to have confidence in their

pricing, the prices must be backed up by an efficient infrastructure
of products and services. If the company’s services or products are
of a higher quality than their competitor’s, then salespeople have
the edge in negotiations. If they can sell quality, not just price, then
the company is in good shape.
RULE SIX: ADD NEW PRODUCTS AND SERVICES THAT
GIVE YOU NEGOTIATING FLEXIBILITY AND GROWTH
Pricing With Confidence by Reed K. Holden and Mark R. Burton

To create these kinds of high-impact offerings

companies must:

•Create high-value offerings for target customer

segments.
•Offer low-value flanking products that appeal to
price-sensitive customers.
•Meet or beat competitive performance on core
customer needs.
•Build strong fences between high and low-value
offerings.
•Equip salespeople with the tools and knowledge
to have clear discussions with customers to define
price-value trade offs.
•Give salespeople well defined value levers to
modify offering value and price by adding or
removing specific features.
RULE SEVEN: FORCE YOUR COMPETITOR TO
REACT TO YOUR PRICING
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Companies must develop well constructed game plans that focus

not on beating out their competitors, but rather on getting them off
their backs. This process is designed to ensure that everyone in a
company is cooperating and presenting a unified front.

Step 1. Improve Understanding of the Environment: Make sure

the people making the decisions have a strong understanding of
the current competitive environment.
RULE SEVEN: FORCE YOUR COMPETITOR TO
REACT TO YOUR PRICING
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Step 2. Determine Pricing Strategy: Choose one of three pricing

strategies: skim, neutral, or penetration.

Step 3. Develop Communications Policy: This will help avoid

price wars. Establish a communications policy that controls what
people say to anyone outside the company.
RULE SEVEN: FORCE YOUR COMPETITOR TO
REACT TO YOUR PRICING
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Step 4. Determine What to Say: Determine what the right thing is

to announce to the market. Recognize that what the company
says may set industry standards.

Step 5. Determine What to Do: Back up what the company says

with practices.

Step 6. Monitor Results and Improve the System: Assess what

competitors are doing and what is happening inside the
organization itself. Monitor what is working and what is not working
and improve the system.
RULE EIGHT: BUILD YOUR SELLING BACKBONE: TEACH YOUR SALES
FORCE AND MANAGERS TO NEGOTIATE WITH VALUE
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Holden and Burton encourage companies to understand the value

they create for their customers and how their offerings differ from
the competition. Any time a company does not fully understand the
value they create, money is left on the table. Holden and Burton
offer three initial steps for building backbone in the negotiating
process.

Step 1: Admit that there is a problem.

Step 2: Recognize that salespeople and managers need to

understand and focus on the value that they provide their
customers.
RULE EIGHT: BUILD YOUR SELLING BACKBONE: TEACH YOUR SALES
FORCE AND MANAGERS TO NEGOTIATE WITH VALUE
Pricing With Confidence by Reed K. Holden and Mark R. Burton

Step 3: Implement programs in the selling organizations to

accomplish this move to value on a consistent and systematic
basis.

Putting backbone into a sales approach takes planning.

Anticipating the reactions of the customer and the competitor are

vital.
RULE NINE: TAKE SIMPLE STEPS TO MOVE FROM
COST-PLUS TO VALUE-BASED PRICING
Pricing With Confidence by Reed K. Holden and Mark R. Burton

The pricing strategy must hold up well in five areas:

Repeatability: The process produces consistent results.

Visibility: The salespeople understand how the prices were
decided.
Scalability: The pricing policies hold up if the scope of the job is
increased.
Accountability: The managers are able to measure results and
determine accountability for those results.
Standardization: The process is used for the majority of the
cases that it is designed to handle and the organization sets
perimeters for how to deal with exceptions.
RULE TEN: PRICE WITH CONFIDENCE: REMEMBER
WHO YOU ARE
Pricing With Confidence by Reed K. Holden and Mark R. Burton

If companies set out to apply these ten rules they will begin to
develop confidence in their pricing decisions. They can change the
conversation with customers from talking about price to talking
about value. This process begins with strong senior leadership.
The CEO should understand the interconnectivity of all
departments in this process and begin to implement metrics that
track results from each department.
RULE TEN: PRICE WITH CONFIDENCE: REMEMBER
WHO YOU ARE
Pricing With Confidence by Reed K. Holden and Mark R. Burton

The process Holden and Burton outline in Pricing with

Confidence takes commitment, coordination, and the discipline of
multiple individuals. It requires willingness to change and the
determination to stick with it. However, if companies can make it
real for their team and their customers, they will see results and
reap the benefits.
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Pricing With Confidence by Reed K. Holden and Mark R. Burton

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