Here’s 10 ways you can control your net prices:
1. Identify all discounts, rebates, “marketing” contributions and other amounts spent directly with the customer. Map it all in a price waterfall.
2. Identify 2-3 key performance indicators from the waterfall (pocket price is just one) and communicate relentlessly about them internally.
3. Communication with the sales team is key. Explain reasons for the control. Solicit feedback and suggestions for process improvement.
4. Build a process that allows for exceptions with the right approval steps in place.
5. Ban exceptions that are not properly justified.
6. Consider if all pricing/discounting decisions must go through approval or if you can find thresholds that would allow for auto-approval. Otherwise, you might be bombarded with small approvals and commercial agility might be lost. Ideas for auto-approval can include: above internal target net price, X% above competitive prices or “market” prices, minimum customer size (order or annual value), pre-approved (by the pricing team) customer segments or product categories.
7. When going from a less-strict to a more-strict price controlling process, spend a lot of time (yes, more than you think you need to) on managing the change and resistance both from external customers AND internal stakeholders. You may otherwise be choking off key customer spends.
8. Use software to support the process – otherwise you overload on data and manual exceptions.
9. Allow for controlling differences per market / business unit / country when doing international business. There ARE differences in how we all do business around the world.
10. Keep in mind that being in control is not the same as optimization. Control is good where you otherwise leave money on the table or have risks from customers exploiting the lack of internal control.