3 Steps to a Pricing Transformation: Ask an Expert
Question: Hi Mark, I hope you are well. I would like you to write a new blog/ article on how organizations should embark on a pricing transformation journey and how to prepare a systematic roadmap to achieve pricing excellence. Thanks and Regards, T
Answer: Hi T, like most questions I get, this is a HUGE topic and impossible to answer in a single blog. However, here is some insight.
Pricing Transformation: Where to Start
Picture a future of effective pricing. If you’re going for a complete transformation, it’s probably very different from where you are today. Here are a few important items that will help me make a total pricing transformation at my fantasy company:
The products we build are well defined to solve problems that buyers truly care about and value. These products are highly differentiated from our competitors in ways that buyers value. In other words, we only build product buyers are willing to pay for.
Marketing understands value from the customers’ perspective and implements programs that communicate that value.
Salespeople understand the value of a typical buyer and are able to have value conversations with each specific buyer to help them determine the value of solving their problem. Our salespeople are well versed in negotiations and don’t fall for tricks used by procurement departments.
Pricing has access to the data necessary to see that we’re improving in creating, communicating and capturing value. In other words, watching revenue and margin increase.
The Pricing Team
The pricing team has the skills to be true pricing champions. These skills include understanding pricing, understanding data, and leadership. The leadership skill is the least common among pricing people.
The Pricing Council
The company has a pricing council that includes executives to coordinate pricing initiatives. These pricing initiatives are managed by the pricing team and communicated on a pricing roadmap.
We are able to quote deals instantly, using real data to help us understand that buyer’s willingness to pay.
Surely there are a ton more, but these came off the top of my head. This vision is likely very different from your reality.
Create Your Vision
The question you’re likely asking is how to get there?
First, create your vision. What are all of the things you would like your company to be able to do? Feel free to borrow the ideas from above. Many pricing consultants have questionnaires that serve as pricing audits. Look them over for ideas on where you want to be.
Assuming this vision you created is far different from your current reality, call that vision the 5-year goal. Share it. Talk about inside the company. Done well, this act will build your reputation as a strategic contributor to the company.
Next, take your vision and break it down into actionable steps. This isn’t easy and you won’t be perfect, but try. As you jump into implementation, you will learn more and think of more ideas. Keep this list updated. Think of these actionable steps as projects.
Go through this list and rate every project on two factors: 1. How easy is this to do? 2. How much impact will it have?
Finally, using those two criteria, pick one or two projects and start working on them. Don’t be afraid of hard work. Enlist others, but work hard beside them. Use tons of leadership skills. Be collaborative, not combative.
This feels like a great start to a real transformation and a huge boost to your career.
Good luck and let me know how it goes.
Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.