Any major change to pricing strategy or tactics requires several people to cooperate, which means you need the ability to influence them. I used to think that knowing the right answer was enough. Boy, was I wrong. My success trajectory changed when I internalized the phrase, “Do you want to be right or effective?” You get paid to be effective.
As a pricing professional at a couple of major semiconductor companies, I failed and succeeded in introducing new pricing capabilities. It had everything to do with how well I could influence others in the company. In the work I do now with recently acquired portfolio companies, it is obvious that without buy-in from the existing leadership, new pricing strategies are much less successful than they should be.
Often, I get pushback from executives at these portcos. “Our customers won’t take a price increase.” “Our competitors will steal our business.” “Everyone will churn.” Although we look at many new pricing strategies, raising prices is definitely on this list. To be fair, almost everyone is afraid to raise prices.
The question then is how to get them to accept and sometimes even proactively support price increases or changes in strategy. The answer is simple, but not easy. We don’t start by talking about pricing strategies. After all, that is the center of the tension.
Instead, we focus almost exclusively on their customers. What value do they get? Why are they different? Why does one get more value than another? As we learn to articulate value from the customer’s point of view, executives often say, “We aren’t charging enough.” Then, it becomes much easier to create strategies so that customers who get the most value also pay more.
The key to motivating pricing change is not to focus on pricing but on the value each customer receives. The more value, the more they are willing to pay. Once you understand how buyers perceive value, it’s much easier to gain cooperation when selecting and implementing a new strategy.
What makes pricing so fun is that every company and every situation is different. You win by knowing many frameworks and learning how buyers perceive value. If you want help with any of this, let us know. It’s what we do.
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Tags: price, pricing, pricing skills, pricing value, value, value-based pricing
