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Making Your Pricing Strategy Stick

by John Hogan, Tom Nagle  |  
December 13, 2005

As any experienced marketer knows, developing strategy is one thing—managing the change process to embed that strategy in the organization is quite another. All too frequently, companies make substantial investments in more effective pricing strategies and then fail to reap the expected return on that investment because they didn't sufficiently invest in implementation.

The truth is that implementing effective pricing strategy involves changing the expectations and behaviors of all of the actors involved in the sales process. Customers must learn that they will be treated fairly and that abusive purchase tactics will not be rewarded with ad hoc discounts. Sales must learn that they will be rewarded for closing deals that increase firm profitability rather than using price as a tactical lever to increase sales volume. Finance must learn to look beyond cost as a determinant of price to better understand the tradeoffs between price, cost, and market response.

Successful implementation of pricing strategies requires targeting specific undesirable behaviors and devising a detailed plan to change them. Our experience has shown that there are three main ways to affect these behavioral changes:

1. Provide effective incentives.

2. Set appropriate expectations.

3. Develop the necessary organizational skills.

Provide Effective Incentives

When actor/playwright/composer Noel Coward said, "If you must have motivation, think of your paycheck on Friday," he might well have been talking about how to motivate salespeople to move to a value-based selling approach.

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John E. Hogan is vice-president and director of research in the Boston office of Strategic Pricing Group. He can be reached at To register to receive SPG Insights, visit

To, is a group leader in the Cambridge, Massachusetts, office of Strategic Pricing Group, a member of Monitor Group. He can be reached at

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