The Niti and Nyaya in Pricing

In pricing, it seems that people are always looking to get the number fast—and want that number to be a good one.  What is a good number?  It depends on who you are talking to. The sales team wants a number that will help them close the deal. Finance wants the number that will deliver profits.  Marketing wants that number to best position the offering in the market, and drive customer engagement. Enter the pricing professional, and we have to deliver this perfect number. (1)

I do not lament this situation.  In fact, as a pricing professional, I relish in it.

Pricing balances the needs of very disparate interests. Pricing professionals consider profitability, shareholder interest, customer demands, customer psychology, and much more in our recommendations.

In balancing these issues, as a pricing professional, I in no way expect everyone to “get it.” In fact, I don’t even think that is productive. I want sales to focus on sales, marketing to focus on marketing, product strategy to focus on product strategy, and finance to focus on finance.  That is, I want every functional lead to focus on the niti of their job.  It is my job, as a pricing professional, to bring my own niti of pricing to the decision and then drive a broader nyaya decision.

What is the niti and nyaya? 

The issues of niti and nyaya were introduced in the Bhagavadgita written between 400 and 200 BCE.  In a central story to this epic, Arjuna, an invincible warrior, discussed with Krishna the merits of war.  Arjuna expressed profound hesitancy about the upcoming battle. His reluctance was not because he feared loss. On the contrary, he was confident in the win but knew that in the process he must personally kill many people, including friends, acquaintances, and many followers simply caught on the wrong side. One would say Arjuna was contemplating the nyaya of war.  Krishna, on the other hand, argued that Arjuna had a responsibility, a duty to fight. In doing so, Krishna argued for the niti of his role.  Fight Arjuna did. Afterwards, the funeral pyres were stacked with the losses and surrounded by the wailing of mothers and wives lamenting their losses. So, who was right? This is a call to meditation, not something that can be given a simple answer. (2)

Niti refers to the organizational propriety and behavioral correctness of an individual’s decision. As pricing professionals, we want—no, need—sales, marketing, product management, and finance to focus on the niti of their work.  To bring their domain knowledge and needs to the decision.

Nyaya refers to the comprehensive concept of said decision correctness. As pricing professionals, it is our responsibility to bring these disparate views together, acknowledge the inherent tradeoffs, and drive a decision that benefits that whole.

Pricing professionals have their own niti to contribute as well.  Volume hurdles, Economic Value to Customer, conjoint analysis, price structures, legal restrictions, pricing psychology, and many other issues are domain specific to pricing.  These are all very useful tools to get at the “good number.” Yet pricing isn’t just about tools.  It is about driving company performance.  In this, we are focused on delivering a “good number” aligned with the nyaya of the firm.  That is, we are focused on the bigger question of what is right?

Individual responsibility and accountability are key to driving high-performance organizations.  In this, niti dominates. However in setting the direction for performance and helping the team to get there, one must focus on the nyaya. In pricing, we get to do that too.