Darlene Nordstrom is an accomplished pricing professional with experience in developing and implementing worldwide software pricing and licensing strategies spanning traditional on premise, cloud and software as a service (SaaS) offerings. Broad financial knowledge including revenue recognition, standalone selling price, return on investment, profit and loss statements and various analyses such as profitability, variance, impact, market and competitive analyses.
In this episode, Darlene highlights the crucial role of interdepartmental collaboration in developing a robust pricing strategy. Additionally, she stresses the importance of having a designated pricing specialist to oversee the entire process.
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Why you have to check out today’s podcast:
- Find out why interdepartmental cooperation makes a successful pricing strategy
- What added value does a pricing person bring to the table with departmental integration notwithstanding
- Learn why you should be discerning when creating short-term and long-term pricing efforts
“Cross-functional collaboration – to me that is key. What’s been successful in my 15 plus years of doing pricing is having that cross-functional collaboration where everyone feels like they have a voice.”
– Darlene Nordstrom
Topics Covered:
01:30 – What prompted her to pursue a career in pricing?
02:15 – Pricing as a team effort and a collaborative endeavor
04:49 – How does a collaborative effort in pricing look like in IBM?
05:29 – Discussing the process in reaching a pricing decision
07:18 – Which pricing decisions need this complicated process of decision making?
08:52 – Why the need for a pricing person when there is already a collaboration with other departments?
11:50 – What added value does a pricing team bring to a corporation?
12:52 – Important considerations to think about in terms of creating short and long-term efforts in pricing
15:17 – Partnering with financial folks to do the analytical part of interpreting data and KPIs
17:14 – IBM as a premium price leader doing the competitor-based pricing
18:57 – Talking about the differential value in a competitor-based pricing
20:57 – How hard was it changing a pricing metric for a product and when do you consider changing it?
22:58 – Darlene’s pricing advice that could impact one’s business
Key Takeaways:
“You don’t set your price once and done, you just keep reiterating it. And the pricing team is responsible for providing those meaningful insights.” – Darlene Nordstrom
“What you shouldn’t do is make short-term decisions that will impact your long-term goals. Being short-sighted and reacting, you don’t want to end up in a price war and react because a competitor did something.” – Darlene Nordstrom
“You always have to be thinking in terms of that end goal in mind and work backwards, and maybe there are some iterative steps that you could take to get to that end goal. I’d be careful about making some short-term decisions that impact your long-term goals.” – Darlene Nordstrom
People / Resources Mentioned:
- IBM: https://www.ibm.com/
Connect with Darlene Nordstrom:
Connect with Mark Stiving:
- LinkedIn: https://www.linkedin.com/in/stiving/
- Email: [email protected]
Full Interview Transcript
(Note: This transcript was created with an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Darlene Nordstrom
My favorite is the cross-functional collaboration. To me that is key.
Mark Stiving
Today’s podcast is sponsored by Jennings Executive Search. I had a great conversation with John Jennings about the skills needed in different pricing roles. He and I think a lot alike. If you’re looking for a new pricing role, or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing pricing people. Say that three times fast.
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the important relationship between them. I’m Mark Stiving, and our guest today is Darlene Nordstrom. And here are three things you want to know about Darlene before we start. She is the director of pricing strategy at Wolters Kluwer. She was in pricing at IBM, and I don’t think I’ve ever talked to an IBM pricing person, so this is going to be exciting. And, last year she completed Trifecta Spartan Races, which meant she was in amazing shape last year. Welcome, Darlene.
Darlene Nordstrom
Thanks, Mark.
Mark Stiving
Hey, this is going to be fun. First question, how did you get into pricing?
Darlene Nordstrom
Well, I was at IBM actually. I started out in the finance department and a pricing role opened up in IBM and took the opportunity and seized it to learn a lot more about pricing. And I never looked back. I loved it. It brought me to the front of the house instead of looking in the rear view mirror. And I found it very dynamic and exciting and there’s always things to learn. So I stuck with it for all these years since.
Mark Stiving
Oh, that’s a really interesting way to think about it. Finance is looking in the rear view mirror and pricing is kind of at the front, right? We’re looking out the front window. So most people, when I talk to them from finance, they think pricing is really about cost-plus, it’s about margin. And is that how the finance people at IBM thought?
Darlene Nordstrom
No, there was a big component of that. What I have to say is I think in B2B where everyone thinks that they own pricing, right? In B2B, it seems like, and a common thing that I always hear is everyone touches on pricing but no one owns it, right? So, the product thinks that they own it because they have P and L responsibility. Sales think they own it, they’re closest to the customer. Finance thinks they own it because they manage cost and margin. But what I found successful and what worked in IBM and other companies that I’ve been in is, setting up a cross-functional collaboration team, right? Pricing is a team sport, right? In my view, it’s highly interconnected. And so, how do you actually navigate that? You have input from various parts of the organization like sales and marketing and product, very valuable insights, right?
And since everybody feels like they have their hand in it, the best way to navigate that is through a cross-functional collaboration effort. Everybody has a voice, everybody has their inputs, and you work through all of the pricing actions and proposals through a cross-functional way. And if there’s any need for escalation, there is one person who at the end of the day is accountable. So as long as you have clear roles and responsibilities that function or that kind of operation model works very, very well. And that’s where I got to see a lot of the other side of the business in terms of markets and segments and customers instead of looking at it in the rear view mirror from a finance perspective.
Mark Stiving
Yeah. So I love that answer. That was really good, on the whole collaboration piece, I think you hinted or gave us the answer to this, but I’m going to push a little bit farther. One of the problems I always see in collaboration is that we don’t agree, right? Somehow sales don’t agree with product and we need lower prices, we need higher prices. I won’t even say who says which. But there’s this disagreement of what it is we want to do and somebody has to make the decision, right? In the end, there has to be a decision maker. And, it feels to me like collaboration is all about, is all that person’s responsibility because if they know they have the authority to make a decision, they don’t really have to talk to other people, but they really have to talk to other people if we’re going to have collaboration. So how did that work?
Darlene Nordstrom
So I’ve seen it work a couple of ways, and specifically in IBM it was a voting process. Each function had a vote and you were, each function had a delegation, and if you weren’t able to show up to the meeting, you’d delegate somebody else. And you have to make sure that it is somebody within that function that has authority to make decisions, right? Someone a little bit higher up that can actually make those decisions. So it was more of like a democratic vote to get to an answer.
Mark Stiving
And so the most votes won or was there still a decision maker?
Darlene Nordstrom
Well, it was more of an approval. Do you approve it or you don’t, it wasn’t like you give three different options, and you vote on which option is best. So what I failed to probably give you any details behind is there’s a lot of prep and work that goes before that committee actually meets. So, I encourage successful pricing teams to get out of their comfort zone, they get out of their own silos, right? You make sure you set up processes, so that it fosters that collaboration and communication before you even go to the price committee with your proposal. So often me being in finance as a pricing analyst, when I first started in the role of pricing, I would work with the products team, I would work with the marketing team, I would get out of my silo in finance, learn about the business from the customer’s point of view, put that customer hat on and also from the lens of the business and the company as a whole, right?
What was encouraged in these pricing committees was that you look at it from the business as a whole and not just your function. So what serves the business and what serves the customer best was always encouraged. So a lot of work went in before the proposal came forward. So a lot of vetting and discussion and research and analysis went into building the why we came up with the proposal to support the proposal. And then you would vote either reapproved or you reject if it was rejected. There would be some action items to go back and rework the proposal and then come forward again.
Mark Stiving
So this sounds like a lot of work. Do you do this for minor price increases or do you do this for major projects? How do you decide we’re going to go through this amount of effort or not go through this amount of effort?
Darlene Nordstrom
Yeah, it was mostly for larger efforts and it was mostly around new product introductions or changes to your pricing and packaging, revamping your pricing and packaging strategies for your normal kind of day-to-day stuff. It wasn’t, and for your annual price increases, there was more of a center of excellence that set standards and we had a corporate strategy team that acted as a center of excellence similar to Wolters Kluwer where we’re setting up a center of excellence here where you defined the standards around processes, what the technology stack is, sharing the best practices. And that could be around our annual price increases, right? So that would be driven from a center of excellence, or a pricing strategy team. And then within each of the divisions and be used, you would have, it was a little bit more matrixed, right? In terms of having pricing teams, dedicated pricing teams that support the different divisions and business units and dotted line to the general managers or CEOs within those divisions and business units.
Mark Stiving
Okay. Ready for a really hard question?
Darlene Nordstrom
Sure.
Mark Stiving
So, it seems to me that we have all these different departments that we have to collaborate with that are making decisions. What does pricing have to do with any, I mean, what does the pricing team or a pricing person have to do with any of this? Why are we even there?
Darlene Nordstrom
Oh, yeah. Having a dedicated pricing team. Well, because like I said in my opening statement, right? Like everyone thinks they own pricing. So having a dedicated pricing team, where that person usually is responsible for setting up those processes and creating those processes for collaboration, communication, they’re the ones who really set up those cadences and those calls, right? And bring all the parties to the table. Oftentimes when I do that, the biggest thing that I hear from all the cross-functional departments is like, wow, this is great. And we never had this structure before. So really it’s just having a body that owns it and just says, we’re going to create this collaborative effort and taking it one step further, not just setting up collaboration on what your pricing strategy and your list prices are going to be, but also circling back so the pricing team’s also responsible for doing some of the, it is kind of like rear view mirror, but, doing some of the analytics right?
And feeding those KPIs and insights back to that same price committee to say, okay, what’s working? What’s not working? Let’s come up with a solution. Maybe it’s a short-term promotion, or maybe there’s a new competitor or something that’s been newly introduced into the market that we need to rethink our pricing and packaging strategy. So it’s a constant kind of iteration of your pricing strategy. And the pricing team helps kind of facilitate that whole, I call it a flywheel, right? You go, you don’t set it. You don’t set your price once and done, you just keep reiterating it. And the pricing team is responsible for providing those meaningful insights getting into that root cause analysis, not just throwing some KPIs in a dashboard in front of the team, but actually digging a little bit deeper even interviewing the sales team to see what’s working or not working to match qualitative with quantitative and feed that back to the committee.
Mark Stiving
Yeah. So let me add a couple thoughts to what you just said, and then you can tell me if you like them or dislike them or agree or disagree with them. But one thought is that it seems to me that pricing departments in big companies with lots and lots of divisions tend to act more as internal consultants. So it isn’t, I’m going to tell you what to do, I’m going to tell you how to set your price. It’s really where we see the low hanging fruit? We’re asking good questions, but we know a lot about pricing, which not everybody in the company’s an expert on. So that just makes sense that you have these internal pricing people that know this. And the other thing I really like about this process is as these internal pricing consultants, we don’t know the value of every product, right? There’s no way that we could go in and set a price because we don’t know what it should be. All we know how to do is ask questions of the people that know the answers to those questions.
Darlene Nordstrom
That’s exactly right. Yep, that’s exactly right. Any type of pricing project that I take on is really about just trying to handhold and teach the various functions. What are the things that you typically look at to set up your pricing strategy and your pricing. So I think that’s really the value add that the pricing team brings to a large corporation.
Mark Stiving
Nice. In the back of my mind I’ve had this thought just floating lately, and that is breaking pricing up into short-term efforts and long-term efforts. Do you ever think that way? Does that, when I think of short-term efforts, you could think of that as I want to go raise prices, I want to go do price segmentation technique we haven’t done before because I can make an instantaneous impact and long-term efforts I think of as I want to tweak the product portfolio, I want to pick better market segments and build better products. So do you guys think that way at all? Has that been crossing your mind?
Darlene Nordstrom
It does. I think that you have to balance short-term with long-term. Oftentimes what you shouldn’t do is make short-term decisions that will impact your long-term goals, right? Being short-sighted and reacting. You don’t want to end up in a price war and react because a competitor did something. So I think you always have to be thinking in terms of that end goal in mind and work backwards, and maybe there are some, some iterative steps that you could take to get to that end goal. So I’d be careful about making some short-term decisions that impact your long-term goals. That’s my advice. But you could look at based on some of the analytics that you do, you uncover some things that you may want to test in the short term. Even like I said, short-term promotions test something in a market. Or if you’re looking to move towards a longer term platform strategy, there may be some steps in between to get you there that you make in terms, instead of doing a whole repackaging overhaul that you have. You map out phases. And that I would suggest you work closely with the product team and look at the product roadmap and build monetization throughout the roadmap to get there.
Mark Stiving
Yeah. Why are we building the new feature? Why are we building the new product? Who’s going to pay for it? Why would they pay for it? How much would they pay for it?
Darlene Nordstrom
Right. Yeah. You don’t want to get into a reactive mode in the short term. Like, say, there’s a large customer that has a requirement and then all of a sudden that becomes a priority in the roadmap and that sacrifices the long term vision. Yeah. Building out the right features that solve the customer pain points in the long run.
Mark Stiving
Yeah. So you had talked about how you think of this as a flywheel and your pricing team is doing monitoring and you talk about this backwards looking. And so I want to tie all this together for a second. When I teach, I often tell companies to get finance involved with the monitoring and the KPI, and I say that because my gut says that finance really wants to be involved with pricing, they just don’t know how. And, so if we give them the task or the request to say, ‘Hey, would you help us monitor these KPIs, create these reports, these data points, it gives us the ability to watch what’s going on.’ So do you rely on your finance department or does your pricing team have to go do the work to build these reports?
Darlene Nordstrom
Oftentimes it’s the pricing team that is pulling the reports in other companies that I’ve been in that we would have a dedicated data person who would actually pull from, build a data so that we can pull some of the pricing analytics that we wanted to look at. Now, having said that, we partnered with finance. In fact we recruited some finance folks because they do have really strong analytical backgrounds and can navigate Excel very well, but we did have our own dedicated data guru who would pull pricing and analytics that we wanted to look at.
Mark Stiving
Yeah. One of the things I love about finance is, they have access to all the data in the company. So they don’t hide anything from finance and they are very good at whatever BI tool you’re using and Excel, so it’s a powerful team to have on your side.
Darlene Nordstrom
Yeah. Yeah. Finance sometimes doesn’t have access to or they have to figure out how to get access to some of the pricing data or fields, right? Because a lot of what they do is looking at revenue reported, which would be different than what pricing would look at in terms of what’s on the invoice, what’s the quantity, what’s the price, and what was billed not in terms of what was recognized as revenue, because that could skew your insights. So there’s always that bridge between finance and pricing of here’s revenue reported, but here’s actually what was built. Right?
Mark Stiving
Okay. So, I want to ask a secret question about IBM. You don’t have to answer it if you think it’s proprietary, you’re not supposed to. Most big companies, I find, give lip service to value-based pricing and rely relatively heavily on cost-plus pricing. And yet IBM, I could imagine they don’t, that they’re actually truly a value-based pricing organization.
Darlene Nordstrom
Yeah. When I was there, which was, I don’t want to date myself, but it’s been many years so I don’t know if things have, it was a..
Mark Stiving
Couple years ago.
Darlene Nordstrom
Yeah. It’s a couple years ago. But, yeah, I mean, while finance we looked at margins, but we never did cost-plus pricing. At least in the world that I was in, it was always more a perspective of, I would say we did some competitor-based pricing, not ideal, but we did some competitor-based pricing, not true value-based. But I would say that it gave us some insights into where we might want to land relative to our alternatives. And whether we were a premium leader or not. IBM tends to have a view in their perspective as being the premium in the space, right? The premium price, the premium service, the premium software, premium hardware. So we are always priced at a premium.
Mark Stiving
So I don’t know what, if you meant this or not when you said it, but I think competitor-based pricing is, or can be value-based pricing because I say it, I think of it this way. Our customers decide between my product and a competitor’s product. And what I have to know is what’s the value that I add that they don’t? So what’s the value of the difference in the products? And so therefore my price has to be relative to their price, but I don’t have to be equal to their price. I think if someone’s choosing between my product and a competitor’s product, I have to do competitor-based pricing, but we’re going to add a layer of value on top of it. Does that make sense to you? Does that resonate? Yeah,
Darlene Nordstrom
No, what you said at the end is that differential value, right? I think I’m a big fan of looking at that differential value as long as you do your homework and are able to understand what your differential value is. I guess when I spoke about using just competitor-based pricing without that value perspective is just because your competitor priced one way doesn’t mean they got it right? So just make sure you have that in the back of your mind that we don’t always have to match or equal the competitor. Oftentimes when I do competitive research and competitive analysis, I think about, well, I always think in the back of my head, well, did they get it right? So but yeah, I don’t think it’s a bad approach at all, actually, as long as you’re looking at it from a differential value perspective.
Mark Stiving
Yeah. And even if they got it wrong, we still have to be relative to them, right? So if they underpriced dramatically, if we want to sell anything, we have to be relative to them. Now, the one place I would agree completely is what if they got the pricing model wrong, right? So what if they’re selling, if they’re renting movies by the night and we decide we want to sell a subscription to DVDs instead, now that’s getting the business model wrong. And I’m totally with you on that one. Did they get that right?
Darlene Nordstrom
Right, yes. I’ve been in that boat before too. Yes. Where in my analysis and research that I’ve discovered that a competitor, I didn’t believe that they have the right pricing metric. We call it a pricing metric, right? On what you count. So there’s some due diligence and some homework to do to show the proof to sales in the rest of the cross-functional team, why that may be the right or the wrong price metric. So it’s just a little extra homework to do.
Mark Stiving
Yeah. Have you gotten to experience the idea of changing a pricing metric for a product? And how hard was it if you did?
Darlene Nordstrom
Yes, it’s extremely hard because, well, it depends, I should say. It depends on how much insight you have into the customer’s usage. It depends on how much insight you have into the potential new metric that you’re going to, so if you’re going from users to assets, how many assets they would be going to… That gets a little bit tricky to be able to do some impact analysis and size up the new pricing that they would pay going forward if you don’t have some insights into their usage or what that new metric might be. So Yeah. That becomes very tricky.
Mark Stiving
Yeah. And even if you’re right, it’s still going to be hard because you’ve got systems inside your company that are fixed. You’ve got salespeople that you’ve got to train, you’ve got marketing you’ve got to talk about differently. And then we get to train our customers. So it’s like, this is not a trivial thing to do.
Darlene Nordstrom
No, it’s not a trivial thing to do. And then it could take three to five years to even migrate your customers, even after you’ve already trained your sales team, trained your deals desk, set up the processes, set up the new pricing. It could still take another three to five years to eventually migrate your existing install base over.
Mark Stiving
So, we would agree this is something you want to do only when it’s going to put a lot of profit in our company, right? When it really makes sense.
Darlene Nordstrom
Yes. When it really makes sense to do so. Yes
Mark Stiving
Nice. All right. Darlene, this is a lot of fun. I love hearing your stories, but let’s ask the final question and see what, where we go for this.
Darlene Nordstrom
Sure.
Mark Stiving
What is one piece of pricing advice you would give our listeners that you think could have a big impact on their business?
Darlene Nordstrom
Only one I could pick?
Mark Stiving
Yeah, your favorite.
Darlene Nordstrom
My favorite is cross-functional collaboration. To me that is key, that’s been successful in my 15 plus years of doing pricing is having that cross-functional collaboration where everyone feels like they have a voice.
Mark Stiving
Yeah. I think that absolutely is key. And it’s partly to make sure everybody feels they have a voice, and it’s also to make sure that you’ve heard all the different inputs. So even if you get to be king of the world and make all the decisions, if you haven’t heard all these different departments and what they have to say, and then you make your edict, it may not go well.
Darlene Nordstrom
Exactly right.
Mark Stiving
So, fabulous. Darlene, thank you so much for your time today. If anybody wants to contact you, how can they do that?
Darlene Nordstrom
Go find me on LinkedIn under Darlene Nordstrom. I’m there all the time.
Mark Stiving
Okay. And do you shop at Nordstrom’s too, by the way? I just wanted to ask that.
Darlene Nordstrom
I shop there. I wish that my husband and his family owned it, but unfortunately that’s not the case.
Mark Stiving
Because then you’d get a discount.
Darlene Nordstrom
Then I’d get a discount. Yes, yes, then I would be doing what I love pricing. Right?
Mark Stiving
Right, exactly. So to our listeners, thank you so much for your time today. If you enjoyed this, would you please leave us a rating and a review? You can go to ratethispodcast.com/impactpricing to make it easier to figure out. And finally, if you have any questions or comments about this podcast or pricing in general, feel free to email me [email protected]. Now, go make an impact!
Mark Stiving
Thanks again to Jennings Executive Search for sponsoring our podcast. If you’re looking to hire someone in pricing, I suggest you contact someone who knows pricing people contact Jennings Executive Search.
