Wednesday, August 21, 2013

The List Price Question

The List Price Question - You might want to charge more than list price.

What is List Price?
Many salespeople believe list price is that artificially high number which is used as a marker for future discounts. In their minds, it is an unnatural sin to sell anything to anybody for “list.”

Part of this attitude and philosophy comes from daily life. For instance, “Nobody pays sticker price for their new Ford and no real customer pays list for their supplies in our industry.” can be heard echoing through sales bullpens.

But this story doesn’t really hold up well. For example, car dealerships have regularly charged more than sticker for hard to find or a limited production vehicles. Toyota dealers still stick to the manufacturer’s sticker price on most of their line-up.

But we’re not in the car business. Our question becomes should distributors selling things like plumbing, electrical, HVAC and industrial items ever sell at list price or maybe even beyond?

Distribution’s foremost expert on pricing matters, David Bauders of Strategic Pricing Associates, regularly encourages clients to ignore list prices on some products. Salespeople (who are commonly paid on gross margin) squirm when presented with this option. They believe customers will take the list-plus pricing as a personal affront. I have heard the arguments on both sides of the equation to ad nauseam and I find myself coming down on the side of Mr. Bauders.

OK, but… when should I charge more than list you ask? Let me give you three Jeff Foxworthy-like answers:

  • If a product line is not one of your major supply partners and instead provided just as a customer convenience. You might consider charging more than list.
  • If purchases are very small and the gross margin generated is too small to pay for your transaction costs. You might want to charge more than list.
  • If the customer is leaning on you to provide a million value-adds that are hard for your competition to replicate. You might want to charge more than list.
And just in case you missed it, click here to get a great deal on Frank's newest book!  

Come on, it's cheaper than list price!  
See what we did there?  Now go check it out!

1 comment:

Anonymous said...

Danger Will Robinson, Danger! Selling at or above list price, while possible in rare occasions, is fraught with "gotchas." Most Sale's Engineers would be ecstatic to sell at list.