Mistake of the Week: Par Pricing

Par pricing is a commission structure left over from the 1950s and 60s that is unfortunately still in use across our industry and often still promoted by so-called “expert consultants” in the industry. In essence, this is a methodology where a price is set for an installed product, and then to the extent the sales representative is able to obtain a higher price from the customer, that overage is split by some percentage between the contractor and the sales representative. 

The problem with par pricing is that the optics are highly problematic, and it is very easily utilized by consumer activists across the spectrum to allege discriminatory pricing practices in the home, unfair pricing, age discrimination, sexual discrimination, etc., etc.  And if we get into the discovery process in litigation, we inevitably are going to find that that’s exactly what has resulted: that certain sales representatives have engaged in what appears to be price gouging with certain types of customers. It’s almost unavoidable, especially in regard to the elderly, who may not be as aggressive or sophisticated in working with negotiated pricing in the home.

The fact of the matter is BLLP has been restructuring commission schedules for over 30 years. You can easily reconfigure your commission structure to eliminate par pricing and come away with the exact same net results for both the company and the sales representative.  There is no question that the sales representative is far and away the weakest link in your organization, and if you’re going to empower that link with unlimited pricing discretion, you’re setting yourself up to lose.