Slate had an interesting article on this topic, pondering why it took Coca-Cola 70 years to raise their prices from a nickel to a dime. One problem– they had created perpetual contracts with distributors, somehow not anticipating inflation. (The price of sugar tripled after WWI, and those were the days before high fructose corn syrup.) Another problem– vending machines built to accept only nickels. “The boss of Coca-Cola wrote to his friend President Eisenhower in 1953 to suggest, in all seriousness, a 7-and-a-half-cent coin.”

Even without these challenges, changing a price is much harder to do in the real world than in a spreadsheet or pricing system. You have to change signs, catalogs, brochures, websites, and other materials that actually display prices. You have to communicate to distributors, partners, and sales people 1) that the price has changed and 2) why, so they can explain to customers.

One way to improve the price change process is to make it annual, or on some other periodic basis. This acclimates the organization and its customers and partners, to the notion that prices are not fixed. Unfortunately, in many companies, this process is so time-consuming and expensive that it devours resources that might be better used to figure out what the prices should actually be. Automation can improve many parts of this process, although for some firms, printing and distributing physical catalogs or price sheets will always be expensive in both time and money. Still, it’s better than being stuck at one price for 70 years.

Comments are closed.