Logic vs. Emotion

My thanks to Paula Jones, Craft and Hobby Assn. Canada, for sending me this January 22, 2013 Forbes article, Postscript On Retail Pricing: Avoiding the “Race To The Bottom.”

The author, Greg Petro, moderated a panel entitled “How to Get Entry Pricing Right” at the NRF (National Retail Federation) conference in New York.  He also interviewed retail CEOs and former CEOs.  The consensus among these retail professionals was that to avoid the race to the bottom a company needs to:

  • “Offering a distinct, differentiated product”
  • “Being authentic in their pricing strategies, with an accurate understanding of the customer value quotient…”
  • “Staying true to who they are as a brand”

The obvious question is “If they know this, then why don’t their pricing strategies reflect this awareness?”  The question is equally relevant to the B2B community.

The short answer is that there is a huge difference between logical and emotional acceptance.

Anyone who has been in sales, however briefly, has experienced the frustration of having buyers acknowledge everything the salesperson is saying, yet refusing to make the buying decision.

I learned this lesson decades ago when I did a short stint selling wealth advisory services.  I had a buyer who agreed with everything I said, but refused to take steps to diversify his portfolio away from the CDs (certificates of deposit) he was holding.  In desperation, I said “I’m confused.  You agree with everything I’m saying, but you aren’t willing to take the actions I’m suggesting.  Why is that?”

He said, “I grew up in the depression where cash was king.  I know that you’re right, that there are better investment alternatives for me, but I can’t get past the feeling that I’d be giving up my security by moving away from cash.”

The lesson here is that emotions trump logic every time.  I believe that’s what is happening with CEOs everywhere, B2B as well as retail.  They know what they need to do to stop discounting, to stop the ‘race to the bottom’ Mr. Petro cites, but they can’t get past the fear of losing a sale or a customer to a competitor with a lower price.

It’s what’s driving companies, especially retailers, into the arms of software developers who help these fearful executives ‘monitor’ their competitors’ pricing with the goal of helping them price more effectively when, in my opinion, this ‘knowledge’ heightens the CEO’s fears and makes them less strategic and more reactionary in their pricing.

Unless and until CEOs replace their fears with well-thought-out pricing strategy, the race to the bottom will continue.  The CEOs who are able to overcome their fears and remain true to their values, customers and their strategy will be the ones whose companies flourish in good times and bad.

I’m not suggesting that overcoming our emotions is easy, but if you can’t do it yourself, then contact one of the myriad, value-oriented pricing professionals, who can help you gain the clarity you need about the value you provide.  That clarity will give you the confidence you need to overcome the fear driving your decisions today.

Happy selling!

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