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Pricing Questions for Stock Market Investors to Ask Executives

5 June 2007 - Features - Editor

It is not as though cost control by a corporation should not matter for a stock market analyst. Keeping tabs on budgets is only common sense, and naturally share holders would like to hear the right noises about how hatches are kept shut on costs which threaten to spiral. It is now par for the course for even an amateur player on a stock market to use meetings with company executives and ask awkward questions about costs, but do we worry enough about selling prices?

Stock market investors with executive backgrounds invariably know that no legally binding financial disclosures have to reveal much about margin details. Sure you can check on the operating margin, and divide the gross revenue by that figure, or compare it with this time last year. But how can any stock market interest know that some elements of the product range do not lose money? Transport costs can be significant for things like salt and sugar, so do some territories make less money than others?

Pricing should have an accountant’s perspective, if not a final say, but many corporations submit to sales and marketing hegemonies in this respect. Big runs may spend hours and your money confabulating on how much incentive to pay sales people, but the latter often have the last laugh because they determine selling prices, or at least influence them in large measures.

A major part of the pricing quagmire from a stock market perspective is that promotions and deals cost so much in real terms, though they are used as though they are the very life givers of brands! We may delight as consumers that sticker prices have become a kind of joke, but stop to think as a part owner of a company from with your stock market spectacles-would you really switch from that brand on which you depend just because an upstart comes up with a trivial offer?

Ask at least one question related to how selling prices are determined for every round of discussion on cost control, whenever you have a change to dialogue with executives of companies in which you hold shares.

 


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