David Falzani is a CEO at Polaris Associates and a Professor at Nottingham University.
In this episode, David discusses the strategy for driving higher pricing by understanding the value delivered to customers. He also dispels the myths surrounding the notion that high pricing lowers sales, sharing the results of experiments conducted with various companies that prove otherwise.
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Why you have to check out today’s podcast:
- Learn how to achieve profitability without constantly chasing pricing
- Find out the underlying reasons for underpricing and dispel common misconceptions about the negative impact of higher prices on sales
- Discover experiments where doubling your price yields significantly higher profitability compared to low pricing strategies
“Think dynamically about price and do it often.”
– David Falzani
Topics Covered:
01:42 – Expounding on ‘sustainable wealth creation’
02:54 – What caught his interest in pricing
04:36 – Three reasons why underpricing exist
06:48 – Emotional baggage and fear that comes with underpricing
08:13 – Frequency of price changes and increase
09:37 – 12 exercise the book suggests you can do to revisit your pricing strategies
12:13 – What makes companies lose confidence in pricing higher
14:37 – How to be profitable without chasing price all the time
17:01 – A case of a perfect example of understanding the relationship of pricing and customer value: Apple versus Android
18:21 – Why double your price? [And experiment you can do]
22:59 – Light double your price [an experiment for the more risk -averse]
24:29 – Looking at the numbers in terms of feasibility of price increase
26:57 – Busting myths about pricing higher
29:24 – David’s best pricing advice
Key Takeaways:
“The frequency of revisiting your pricing decisions. Every time you revisit it, do something different, use a different piece of analysis.” – David Falzani
“Don’t just go and revisit the same comparison to competitors or if you are using cost- plus, which I hope you’re not. Think about the frequency at which you are reviewing those pricing decisions.” – David Falzani
“The more you look at pricing, the more questions that are raised, the more you start to educate yourself about your own customers, your clients, the market, competitors, and all those dynamics.” – David Falzani
Resources/People Mentioned:
- Thinking, Fast and Slow by Daniel Kahneman: https://www.amazon/Thinking-Fast-Slow-Daniel-Kahneman/dp/0374533555
Connect with David Falzani:
- LinkedIn: https://uk.linkedin.com/in/davidfalzani
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
David Falzani
Think dynamically about price and do it often.
[Intro]
Mark Stiving
Today’s podcast is sponsored by Jennings Executive Search. I had a great conversation with John Jennings about the skills needed in different pricing roles. He and I think a lot alike. If you’re looking for a new pricing role, or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing pricing people. Say that three times fast.
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the cognitively biased relationship between them. I’m Mark Stiving, and our guest today is David Falzani. And here are three things you want to know about David before we start. He is the CEO of Polaris Associates, a consulting firm, and he’s been running that for 16 years. He is the professor at Nottingham University, and he’s focused on sustainable wealth creation. I can’t wait to hear what that actually means. And he just released a brand new book, Double Your Price: The Strategy and Tactics of Smart Pricing. Welcome, David.
David Falzani
Thank you very much indeed, Mark. It’s a great pleasure to be here. I’m a big fan of all your work and also this podcast.
Mark Stiving
Oh, thank you very much. I appreciate it. Okay, so what is sustainable wealth creation? I’m thinking that’s me getting rich, but I’m probably not what you mean.
David Falzani
Yeah, it’s one of those interesting kinds of terms, isn’t it? It can mean many things, perhaps to different people. So the way I interpret it, it’s about finding a sustainable way for businesses to succeed. And I don’t think that’s necessarily just about ecology. I think it’s all about the fundamentals that we know well. So, things like the importance of making a positive margin, being able to create economic wealth so that that can be reinvested back into staff training into improved services or products for the company. And also, of course, the ability ultimately to generate taxes, which we all rely on, of course, to run all the services we have in our societies today. So I have a sort of quite holistic broad view of what that means, but for me, it kind of covers that element of the entrepreneurial spirit with a view that we want to build things that can last for a long time, essentially.
Mark Stiving
Yeah, it’s kind of a really nice phrase because it says, hey, I want to run, I want to make smart business decisions that last a long time, not just take advantage of the short term.
David Falzani
Yeah, I think that’s exactly right. I think having a long study.
Mark Stiving
So how did you get into pricing?
David Falzani
Yeah, so interesting question. So I’ve been involved with either starting or growing businesses for about 25 years or so both as an entrepreneur and then also as a business consultant. And I started working with small and medium businesses through some universities, such as Oxford University, and then my own university, which is Nottingham University. And what I noticed working with these small and medium businesses, potential high growth businesses, is that the number one error I found that they were stuck with was underpricing. So for me, the number one error I spotted was this just chronic underpricing and under-appreciation of how they should price the importance of price, and ultimately about having a pricing point, which is too low to really make their business sustainable, to allow them to prosper and to succeed.
And so that kind of lit my interest, I suppose, for pricing as a topic, it’s importance. And then this kind of interesting where I’ve kind of started was this observation that people seem to underestimate its importance. They don’t come to review pricing often enough. I think, again we talk more about this idea about if I keep my price low, I’m more likely to survive as a business. And that seems to be ingrained, and certainly something I saw, and still see today as being very common with the small and medium businesses. And that’s the kind of issue that I’ve tried to address in the book. And also something that I’m very passionate about in trying to spread the word and trying to fix as well.
Mark Stiving
So do you think those are the reasons why people underprice or, are there other things like they just don’t understand what they could price, what they should price?
David Falzani
Yeah, so I think there are at least three reasons, for this bias, this cognitive bias, this lack of rational, considered thinking about pricing. So I think the first reason is that many particularly early stage businesses have a lack of confidence in their value proposition. So to me, the value proposition, I always like to summarize it as it’s the thing that you do that customers value, and they value it so much that they’re willing to give you money for it. And hopefully that thing is also differentiated so different in some way and better in some way than the competition. So if they have a lack of confidence in their value proposition, fundamentally, then they’re more likely to think, well, a lower price is required in order to succeed in the market. The second reason is, an associated one, which is that I think sometimes CEOs have a fear that they won’t have enough sales in order to cover their overheads.
So they have this kind of fear that if we don’t get enough sales over the next month, the next quarter, whatever the time period is, then I won’t be able to cover payroll to pay the salaries. Maybe they can’t pay the rent on the offices. And they also have some associated belief that having a price low will alleviate that in some way, which is often a very misguided view. And then I think the third and final reason that I see this bias in price is that companies often set prices in a very irregular way or in an irregular frequency. So they might set prices once a year, they might do it once every few years. And once it’s set, it’s something that’s not reviewed enough or not often enough, and perhaps not reviewed with a view as to how important and dynamic that pricing decision can be. So that kind of very sort of like we look at pricing, it is what it is. Now, we concentrate on all those other aspects of our business when in fact they should be going back and re-reviewing that. So those are my three main kinds of reasons about why this underpricing paper exists.
Mark Stiving
So I liked all three of those. On the last one where you talked about the irregularity, I often say companies use the set it and forget it rule because they just don’t want to go back and revisit it. It was such a hard decision. Why would we want to make that decision again?
David Falzani
Yeah. I absolutely get that. I think it’s a great expression to use. I think there’s a lot of emotional baggage there, particularly for CEOs and directors of businesses. There’s a fear of getting things wrong, of messing things up. There’s perhaps a lack of realization that useful market experiments can be used. They can be executed in the market with little experiments to test pricing decisions, and they can be done in a way that is low risk. And pricing is sometimes viewed as, it’s only a decision for the very highest levels of the management, or, paradoxically it can be the other way around. And the board of directors are not talking about pricing. They’ve kind of delegated it down to the middle ranking management and pricing never really comes up as a topic with the frequency or the magnitude of importance that it really warrants at the boards of directors. So there’s kind of two kinds of extremes there, but I’ve seen them both in place. So yeah, so I think it’s an interesting phenomenon that we see in management today.
Mark Stiving
Yeah, and I hadn’t thought of this until you just brought this up, but, as pricing people, we understand behavioral economics and prospect theory and losses win larger than gains. Imagine that you’re making a decision to change prices, you either increase profit or you decrease profit. Now, if I decrease profit, I lose my job. If I increase my profit, I might get an attaboy. Losses loom much larger than gains in that case. So why would I ever change my price?
David Falzani
Yeah that’s so true, isn’t it? Yeah, there’s asymmetric risk for those people. So and which is why and I say this in the book, I think it’s really important that pricing is on the agenda for boards of directors, and it’s something that they revisit regularly. It’s not a once a year event, or exercise. It’s something they should be doing regularly. And now how appropriate or how regular should that be? Well, I think it depends, obviously, on the type of business that dynamics, the speed or rate of change within the environment, both on the product side, but also in terms of competition and customer behavior. But I think the message is really simple, isn’t it? You’re not doing it often enough, folks. You need to really be looking at it in a different way, right?
And you need to be, I always think, when I work with them as a consultant, I say to my clients, I say, it should be a standing item on your agenda. Every time you have a board of directors meeting, it’s there on the agenda. And you ask four or five kind of prophylactic questions around what’s happening, what are we doing on pricing, what are we looking at? What have we reviewed? Yeah. Are we thinking more dynamically, more imaginatively perhaps, about what we can do regarding our price points? So I think, yeah, it’s an interesting area.
Mark Stiving
I’ve heard from other pricing experts, and I kind of like this thought that you should be doing a pricing project every quarter. Now that doesn’t mean you have to be changing prices every quarter, but you should be constantly looking at some pricing aspect, and saying, hey, what can we test? What should we be tweaking? So I liked that.
David Falzani
Yeah, I think it’s a really nice idea again when I read the book, I wanted it to be a very practical book. So in here I put in about 10 or 12 exercises in there that the reader can do on their own business. And they’re all around the kind of things that you just highlighted there, Mark. So how do I reframe value for my business? Have I revisited the essentials, like the pricing scattergram to understand where my competitors are going in terms of their position on pricing. Have I thought about how I can add additional layers of value to my fundamental, customer value proposition or USP, unique selling proposition.
Have I thought about the importance of emotional value? And particularly I think with manufacturing businesses more perhaps than service businesses, there’s a very sort of kind of like a rationalist kind of view about what it is that we do as a business that we have product and it has features and the emotional side how do we make it easier for the customer to say yes to us? How do we attach additional layers of emotional value to a product? I think sometimes manufacturers are kind of slow on that because perhaps because of the nature of manufacturing, you’ve got a factory or factories to run and it’s a very complex environment operationally. So you tend to be perhaps a little bit more pragmatic and a little bit more sort of rationalist in terms of trying to think, well, this is a physical thing that we’re making.
Whereas, all the evidence, of course, there’s so contrary to the fact that markets today in western economies are highly sophisticated. Human beings are very emotionally driven. Daniel Kahneman with thinking fast and slow has just shown how irrational some of the behaviors can be around decision making, about how to recognize value. And if you’re not thinking on those terms, then you’re certainly not maximizing the opportunity you have as a business in terms of selling your own wares and also developing, of course, new products, but also in terms of delivering customer value and getting your customers to actually be happier and more engaged with you as well. And if you do that right, of course, then there’s a virtuous circle that comes along where all of your stakeholders are more engaged, you’ve got a happier, healthier sort of work environment, happier employees and so on. So again, it all kind of interlinked. And that’s certainly one of the things that I find so fascinating about pricing. It’s just this huge effect on all those different aspects of business.
Mark Stiving
So of the three reasons that you gave for why companies tend to underprice, the one that resonated with me the most is by far the first one, right? And that is that they lack confidence in their value proposition. Now why can’t companies understand the value they deliver to their customers and how their customers perceive that value?
David Falzani
Yeah, that’s a really interesting question, and I don’t have a perfect answer for you. I think there are a few different things that come to mind. I think one is that in the face of the customer, it’s hard to have really high quality data or intelligence that you can use, market intelligence to really find out what’s going on in terms of decision making about trade-offs that customers are making about, what really happened when you didn’t get that contract, when you didn’t make that sale, what really happened? What were the driving factors? And in this environment of uncertainty, which by the way, I think is the best definition of entrepreneurship, managing uncertainty, when faced with uncertainty, I think, it’s easy to lose confidence in your value proposition to lose confidence that you’re actually doing things maybe in an incorrect way or an optimal way.
And when you start to lose confidence, then I think that that’s when you start to think, well, maybe price is the recovery mechanism, we go cheaper, then perhaps more customers will say yes to us, we’ll win more business. And going back to what we said earlier on, that is very much of course a path to undermining the future of your business, the sustainability of it through all the different features that pricing has in terms of protecting margins. So I think it’s certainly this managing uncertainty, acknowledging the environment for what it is. Some customers will always complain about the price, whatever the price is. So realizing this, realizing that the market’s not homogenous, there are different customers, some of them, let’s say are premium customers in terms of a pricing outlook.
Others are price shoppers, they’re very price sensitive. And everywhere in between on that spectrum and getting companies to understand, well, where do you want to sit on that spectrum? What qualifies you to get you engaged with that part of the market? And do you really want to be chasing people who are I don’t want to sometimes use the expression bottom feeders as used. But this idea is very price sensitive shoppersIs that a market you really want to be chasing? Is that somewhere you can survive long term? Can you prosper in other ways that you can differentiate and move yourself up that value ladder to serve the more sort of attractive and more premium customers?
Mark Stiving
Yeah. As I was listening to you speak, one of the things that comes to mind is that I rarely hear of a company willing to walk away from a piece of business. And that almost drives exactly what we’re talking about, because if you can’t look at a bottom feeder or a super price sensitive customer and say, look, that’s just not my customer, then you’re going to be chasing price all the time.
David Falzani
Yeah, absolutely. I will try to make a very simple example in my book. I talk about company A and company B, and company A has a price , which I could benchmark at 100 at most, round number. And company B has got a higher price, the price is 130. Now, company A maybe because of that lower price, it has a higher conversion rate of leads to sales compared to company B. And then in the book, I ask, and this is an exercise straight out of my seminars I’ve done with small and medium businesses. But then I asked them, well, which one do you think is more profitable? Do you think it’s company A with a lower price and a much higher conversion rate? So their conversion rate I think was 60%, or was it company B? They’ve got a 30% higher price, but their conversion rate’s only 40%.
And of course, people say, well, there’s not enough information. I said, okay, assume average margins industry standard margins people tend to be sort of three quarters in the camp of A, is the superior, more profitable business? And the answer of course is, company B And company B wins less business, but it’s far more profitable. It’s actually twice as profitable in company A, again, using average margins and so on. And people kind of don’t get that initially. They really have to think about that before they understand what company A is. And many businesses are like this, Mark, absolutely, they are, I call them busy fools, they’re running around, they’re working really hard for their customers, but they’re not really making any money, but they’re lucky they’re breaking even company B, less busy, but much better margins, much more profitable, more time to sit back to reflect on how they’re generating value.
More healthy, more generous budgets to reinvest into staff training, into product and service development, and I sometimes see this with clients or associates I’ve worked with sometimes with a chain of restaurants and I go and visit the restaurants and it’s really busy and everyone’s running flat out, but they’re not making any money. And the challenge I set then was, well, can you move yourself up slightly in the market so that you’re less busy, I promise you you’ll make a lot more money than you would be just running around like a sort of mad person. So yeah, I think there’s this idea that you can be less busy, you shouldn’t be fearful of that, as long as you’re happy that you’re making great margins. And that is a much easier place to be, in many regards.
Mark Stiving
Yeah. The story that you just told reminds me of Android versus iOS or Apple, where Android has 72% worldwide market share in mobile phones, and Apple makes 85% of the profit in mobile phones.
David Falzani
Yeah, absolutely. Apple’s just a fantastic example of pricing and this relationship between pricing and value and understanding customer value because, as we all know, they tend to occupy the premium price slots in every category that they compete or choose to compete in, last time I looked, and it was probably been six months the last time I looked, I think Apple had something like $300 billion in cash and cash equivalents on their balance sheet, which is roughly, I think three times that of the Federal Reserve. So Apple is just insanely accomplished, understanding these trade-offs, as you say, who are the premium customers, where can we make money? And if we do it well, then we can invest in all those fantastic other elements of the value proposition. It’s not just about having a phone or a tablet or a computer. It’s about how we make our customers feel better. How can we attach emotional value to that? And, yeah, they’re absolutely kings, if you will, of the B to C model of how to do that. And they seem to be uninterrupted in their ability to do this now for decades which is quite an accomplishment.
Mark Stiving
So David, I’ve loved our conversation so far, but I was saving this for the end because I really want to talk about the exercise you use with companies and you say, what would it look like if you doubled your price? So, tell us about the exercise that I want to hear some of the experiences you’ve had.
David Falzani
Yeah, absolutely. Thank you. I love talking about this. So why double your price? So I said it was quite a provocative challenge to some of the audiences that I was engaged with in training. So small and medium businesses, but also sometimes larger organizations, and I’d be delivering sales and marketing training to them. And I would say to them, well, can you double your price? And what I really was saying, is there a safe ring-fenced experiment you can run in the market where you double your price? And I promised them, if you do this, if you’re actually able to do this in a safe manner, again, we don’t want to throw that business away through some sort of mad uncontrolled experiment. But if you’re able to do this in a controlled way, I promise you’ll learn something really interesting about your business, something you did not know before.
And if you’re able to do it, it could be you can actually transform your business, by nature of these things that you discovered, incredible breakthroughs. So to my surprise and delight, having made this quite provocative, and, by design provocative, challenge to my audience, some of these businesses actually did it. They went out there and literally some of them actually literally doubled their prices. So one example was a business who was working in the middle sort of midlands, so the middle region of the United Kingdom. And they were, I think, a video services business, and they were expanding. They were doing okay, but they wanted to move into the southeast market, and London in particular, of course, the capital city. So what they said was, any business that we book or bid for within the motorway system, the freeway that goes around the whole of London, so within that geographical area, any business in that area, we will double our price list. Now to their astonishment, they found that it made no difference to their conversion rate.
So the percentage conversions they got from leads to clients was the same, but of course, from a profit point of view, their profits increased something like eightfold. So what they’ve done is they found a really neat, safe way. So this is a market they were moving into. They weren’t going to damage or risk their existing business being a new market, and they repositioned themselves. And what they learned over the following few months was that they had been very much addressing, we call them earlier, bottom feeders or the price sensitive end of the market. And because of that, they were seen as being too cheap by the premium customers and by doubling their price, they suddenly became eligible, let’s say for those more premium, customers who now look at them with a different view. And so they started booking this business at a much higher margin, and that helped them grow enormously.
So they grew, I think, fivefold over the following two or three years. They found that they’d been chronically underpricing everywhere in all of their markets. Now they didn’t double their price in those of other markets, but they went up progressively 10 or 15, 20% in several steps. And they found that they had an entirely new paradigm and they had money to spend, to reinvest, to grow. They had time that they could pause and not be busy falls not running around all the time. And so this has happened a few times. Now, well, actually many times businesses come to me and say, well, we tried to experiment, David, we found a safe ring-fenced way to do that. Maybe, double, maybe it’s a 50% increase, maybe it’s a 20% increase. But all of those numbers, and I’m sure the audience will know, have a transformative effect, an enormous effect on the bottom line and the ability to generate more cash and profit to reinvest back into that virtuous circle to build the businesses.
So the way that businesses tend to do these little experiments is maybe they, maybe they go into a new territory they haven’t gone into before. So they can go in and start with a brand new set of price points. Perhaps they do it by launching a parallel product line so they ape or copy their existing product line, but they rebrand it, they give it a different bundle of messages and perhaps associated emotional value and a much higher price point, and then they see what happens. There are various other ways that the companies can do these experiments. And I detail them a little bit more in the book. And again, these are things that companies have come and told me, works for them. It’s not me, me creating them. I’ve been collecting all of these stories from the businesses that have been running these experiments, but if you’re able to do it, it’s a fantastic thing because I don’t think anyone who’s actually run one of these experiments has come back and said, well, we didn’t learn anything. Every single one has learned something really interesting about their customers, about their value proposition, about the way that they’re perceived and so on. So, yeah, so double your price, a provocative challenge but an interesting one.
David Falzani
I actually think the concept is fascinating and having people think through even go try it. You’re right, they’re going to learn a lot, but I think it refocuses their mind on what’s the value we’re delivering to which customers. So can we do market segmentation? Can we find the right mix of customers who are willing to pay more or who value the best things that we have? I think it’s just an absolutely brilliant strategy or exercise.
David Falzani
Thank you very much, Mark. There is a double price light version, which is for those who are unable,, for whatever reason to run the actual experiment in the market, it’s to do the thought experiment. So the light version of double your price, which again I cover in the book, is where you ask your management team, what do we have to do in order to justify a literal doubling of our price? Another way of thinking about that, what would have to be in place in terms of the customer perception of the product, about the suite of messages, the communication messages associated with the product, maybe some of the physical or functional aspects of the product or service as well. What would that look like? So don’t worry about how you would do it, but answer the question of what it would look like in order to justify with your current sort of understanding of the market that double price. And then having done that, if you’re able to do that, then of course you can work backwards and say, well, okay, so this is really interesting, let’s unpack it a little bit more and understand, well, maybe there are ways that we can actually execute portions or who knows, perhaps all of that as well. So there is the thought experiment version as well for those less capable or able or people perhaps without the appetite to actually run the real market experiment itself.
Mark Stiving
A little more risk averse. Yes indeed. So if you were guessing what percent of that hundred percent price increase could most companies get away with without really changing their business?
David Falzani
So that’s an interesting question, isn’t it? I think it depends on the nature and the type of business that it is. I always think that there’s an interesting view of the market. I mean, we can use different typographies, different frameworks to try to assess strategic decision making. Think of, well, how can we improve businesses from a price point of view? I think there’s a very simple way of thinking about sort of A class products and services, B class and C class, and A class ones is where customers tend to give them the most scrutiny in terms of how sharp is the price? How much have we beaten the price down? How aggressive is the customer in terms of price negotiation and price discovery. B products or services will be in the middle, and then the C tends to be, and they might only be 5% of the annual spend of a big corporation, but the C tends to be the one that has very little or no scrutiny.
So I think it depends where you are in terms of the products or services that you are delivering. But certainly if you are in the C category, I think rather than price, other things are far more important, such as just ease of purchase, right? If you just make it easy for customers, then it’s quite possible to increase your set point, your price point by a hundred percent., and people do it all the time. You go to Amazon, you go to eBay, and I realize they’re B2C, not B2B, but you see the same tactic that’s being used, but you’ve got basically the equivalent products being sold over multiple price points. I realize I haven’t answered your question mark, but if I was to give you a number I think, for businesses that are not selling into categories that are under incredible levels of scrutiny and detail, then I think certainly five to 8% is achievable without any problem. And I think in a way the inflationary environment we’re in now is kind of like a new opportunity because now customers have resigned to the fact that prices are changing and moving because they have to, because essentially money has become less valuable. So in a way that’s opened the door to actual perhaps more price movement for those willing and able to spot the opportunities and to execute them correctly.
Mark Stiving
I asked the question because I was thinking, how much money do companies actually leave on the table just by poor pricing, skip all the rest of it, right? Just by poor pricing. And you’re thinking on average five to 10%, and that seems pretty reasonable, right? It might even be higher than that. But that seems like it’s a pretty reasonable number. Yeah, I mean, I had a company I was working with the other day. They raised their prices on one of their products by 180% and it had no impact on sales, right? No impact on unit volume.
David Falzani
Yeah, absolutely. Yeah. I mean, I think there are definitely opportunities to put it the other way around. There are definite occurrences and opportunities where businesses just are chronically underpriced. You just don’t understand the value associated and the value derived. I think there’s a couple of things we can use to help business leaders, particularly small and medium businesses, really understand this and understand potential. One is to point out existing categories where products, if you’re essentially identical functionally, are sold at vastly different price points and we can do this for washing powders, we can do this for cosmetics, we can do this for generic drugs like painkillers, like paracetamol or ibuprofen. My favorite example is table water. So bottled water, you think about bottled water, it’s an H2 O molecule, right?
So it’s two hydrogens and one oxygen bonded together. And the H2O molecule on a $25 bottle of water is the same molecule as in the 50 cent bottle of water, and yet , we have these vast price differences. So I did a scattergram that I love to show people, which is looking at the cost per milliliter of non sparkling, so, natural table mineral water sold through one supermarket, and there’s a range of about 600% price difference between the cheapest and the most expensive per unit volume of water. Now the water’s the same, right? It’s the same H2O molecule. There can be no differences. The only differences, or the biggest differences, of course, are in the packaging, the branding, and the associated messages that go with it.
And I always think that’s a great example to try to highlight this sometimes, people just don’t think about pricing in those terms. And I try to reset those assumptions that people have, some of those beliefs, some of the kind of myths that people have. So one of the fundamental myths is that if I have a higher price, I’ll sell less. This belief of price elasticity of demand, which I always argue is not terribly useful in modern, sophisticated differentiated products and services today. It’s great if you’re doing commodities, but I think it’s far less useful today. So I think that one kind of way of trying to reset those assumptions is by saying, well, hey, explain this, why is this H two O molecule being sold at such vastly different prices? And hopefully we can kind of get them out of their current sort of frame of thought into thinking much more dynamically about those pricing opportunities.
Mark Stiving
Yeah, I think that’s great. David, I could have this conversation all day, but we are out of time. Let me ask you the final question. What is one piece of pricing advice you would give our listeners that you think could have a big impact on their business?
David Falzani
I think we’ve kind of said it already, but let me say because I think it is perhaps the number one piece of advice, which is think dynamically about price and do it often. So I think the frequency of revisiting your pricing decisions and every time you revisit it, maybe look, do something different, use a different piece of analysis. Don’t just go and revisit the same comparison to competitors or, if you are using cost-plus, which I hope you’re not so perhaps a discussion for another day, then, think about the frequency at which you are reviewing those pricing decisions. That would be perhaps my number one piece of advice, because I think the more you look at pricing, the more questions that are raised, the more you start to educate yourself about your own customers, your clients, the market competitors, and all those dynamics. So I think that’s perhaps the single thing that everyone can start doing today that would reduce that series of breakthroughs that we want them to find.
Mark Stiving
I think that’s absolutely brilliant because I don’t think we ever truly know that we’re priced correctly and so we can always do more research, more thinking there’s something else we can go do. So David, thank you so much for your time today. If anybody wants to contact you, how can they do that?
David Falzani
One of the great advantages of my name, David Falzani, particularly the surname, is that it’s so unusual. So you can Google me and you can find me very easily, either on LinkedIn or through my various blogs or indeed through the University of Nottingham.
Mark Stiving
Excellent, David, we appreciate that. And to our listeners, thank you for your time as well. If you enjoyed this, would you please leave us a rating and a review. And finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me, [email protected]. Now, go make an impact!
Mark Stiving
Thanks again to Jennings Executive Search for sponsoring our podcast. If you’re looking to hire someone in pricing, I suggest you contact someone who knows pricing people contact Jennings Executive Search.
