Giving away the Store

From time to time, an item hits the news about a company selling something at an absurd price. In the age of online shopping, these mistakes can quickly spiral out of control. When you sell high-octane gas at $0.27 per gallon, you don’t get people coming from all over the world, but you do pump a lot more gas than you normally would. Apparently, the gas station tried to set the price to $2.79, but accidentally entered the decimal point at the wrong place. Word got out, especially when someone called a local radio station and announced the gaffe on-air.

This is why all pricing updates should pass through an automated “sanity check.” The details of the sanity check depend on the context, but should include two levels– a warning and a block. Blocked prices simply can’t be released. Warnings require review and sign-off. Simple checks include margin thresholds and percentage changes. While this is not 100% foolproof, it would dramatically cut down on pricing errors. Even if you’re using Excel as your “pricing system” you can implement sanity checking. For the Colorado gas station that lost $9,000 overnight, that would have been a worthwhile investment. For larger companies with more pricing complexity, and greater potential losses in both direct dollars and reputation, this is even more important.

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