Join Stefan Michel for an in-depth discussion in this video Using pricing as pain management, part of Value-Based Pricing.
- Now most of my clients and participants at IMD, they cannot just give out coupons to figure out who's willing to pay more if you sell gas turbines or cement in large quantities. So what actually happens in those markets is that the different segments receive different discounts. So in this market they have a list price, but no one ever pays the full list price. So in fact, price negotiation actually turns into discount negotiation.
And the biggest problem that happens is if you give too many discounts without getting something in return. So what I say often is pricing is pain management. So every time you ask for a discount, you must suffer for it. So whenever I give you a lower price, I must take something away from you. It could be that if you want a low price, I only do weekly deliveries, not daily deliveries. Or if you want to have a lower price, you need to buy in larger quantities, or you need to pay in advance.
So every discount should have a pain associated with it. Because if you're asking for discounts, and you don't suffer a pain for it, you'll just ask for more. And that's something very important. So you can give a lower price, but you have to get something in return. And that's really one of the important lessons. Pricing is pain management. If they wanna have a lower price, they have to suffer for it. Because if they don't suffer, they will ask for yet another discount, and yet another discount.
So this is really something of how we can use the same ideas of fencing and worshening into a B2B negotiation.