Confidentiality – A No-brainer!

Should you keep your rates a secret? Let’s be honest – it hardly bears thinking about.

Unless you have an absolute monopoly for a product or process you will always have competition in the market place. Allowing others to know your price gives them total control over the competition process.

I came across this many years ago when a company I joined decided that it would publish the price calculations for it’s products to agents looking to place business on their client’s behalf. The motivation was to avoid the constant quoting for business (some of which would not be forthcoming) and to make life easier and less expensive for the agents concerned. A well meant gesture but a complete disaster. The result was quite simple. The agent would use the disclosed rates to calculate the price. The agent would then use the calculated price as a benchmark and disclose this to the other companies from whom it was obtaining quotes.

This, of course, saved the agent some time since the competitors would decline to quote if their affordable price was too dear by comparison. Often, companies will think long and hard about just how much a price can be manipulated downwards. By disclosing the price, the competition where given a clear and simple choice.

It did prove to be some help where the agent genuinely tried to support the company disclosing the rates but failure to get the ultimate “best deal” always leaves the door open to others and can often lead to dissatisfaction on the part of the ultimate client.

There was also a second downside. The company never knew how often it’s products were being considered. Agents would use the guide rates and not keep a record of how many times the quote was nearly competitive. This also affected the representatives employed by the company – in effect there was no measurement of their true contribution.

It was just too easy for the competition to ask for the price before starting their own calculation. All that they then had to do was to discount the original company’s rates.

Eventually, common sense prevailed. The guides were withdrawn from general use and open publication – never to be seen again (except by company employees).

The result was dramatic. The company started to see how often it was being considered. It was able to better gauge the activities of it’s competitors and had the chance to negotiate when it didn’t before.

The bottom line is that, if you publish your rates, you create the impression that the price quoted is the price that you want without having the flexibility afforded to the others in the process.

The same, of course, applies to releasing rates on a verbal basis. To use a poker analogy, who in their right mind would tell everyone what cards they are holding!

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