Develop and Test Price Justifications

A price is not just a number; it is an argument about a product's value. One of the key jobs of a marketing group is to develop tightly reasoned, quantitative arguments that justify the product's price to the customer.

These justifications should not be developed in an ivory tower. They must be tested internally before they are used externally.

The Justification Process:

1. Do the Work: Marketing must do the hard work of quantifying the product's value. This means figuring out the cost of saving a worker-month of engineering time, or establishing the profits lost if a customer can't get their product to market on time.
2. Sell the Salesperson First: A salesperson must be able to convince a customer that the price is fair. Therefore, the first test of any price justification is to use it on the sales force. If the marketing organization cannot sell the salesperson on the price, it is highly doubtful the salesperson will be able to sell the customer.
3. Assimilate and Distribute: Marketing should act as a clearinghouse, assimilating the best pricing arguments generated by individual salespeople and developing them into tools that can be used effectively throughout the entire company.

A product's value is not always self-evident. It often takes a well-reasoned argument to convince a customer of a product's true worth. Providing the sales force with these arguments is a high-leverage activity.