Two companies have asked me for proposals in the last 2 weeks for help in completely transforming the way they do pricing. Huge kudos for any company willing to tackle this. It will almost certainly be very profitable.
However, it’s will also be very difficult. It’s hard to get one person to change. Try getting everybody in the company who touches pricing to change. There will be incredible amounts of friction and even hostility.
As I talked with these two companies, and thought hard about how I would do this, here is an approach I think has a good probability of success without minimal angst.
Steps to Approaching a Company Pricing Overhaul
1. There must be executive level buy-in and participation.
If even one executive isn’t on board, the project will struggle. Imagine the VP of Sales telling his salespeople to do it the way they’ve always done it. Or imagine the VP of products saying nothing has changed. In both cases, a true transformation won’t happen. Ideally, the key executives would be part of a pricing council to help set priorities of pricing initiatives.
2. There needs to be a project lead.
I would recommend a director-level position would ideally take the lead, one that already has a little bit of clout behind him or her. This person must take it upon themselves to identify everyone affected by the pricing transformation and then go talk to everyone, or at least every department, one-on-one. This is a listening tour, no pitching. This person will need to be curious to hear everyone’s perspectives and insights.
The pricing lead will need to ask:
- What are the problems you currently see around pricing and value?
- What opportunities for improvement do you see?
- What would you do if you were me?
- What would help you do your job better? and many more…
3. Form a pricing committee.
For the rest of this post, I’m assuming “you” are the project lead. I’m now talking to you.
While you’re talking to “everyone”, choose the interested ones to become part of the pricing committee. The pricing council, with the executives, focus on the what. The pricing committee, with department representatives, focus on the how. Building relationships and friendships with these people will make the transformation go much more smoothly.
4. Develop a project plan, or a roadmap.
You should then identify all of the possible projects the company may need in order to start, and complete, the pricing transformation. Of course you won’t do them all at once, but getting an almost complete list early is very helpful.
For each item on the list, describe and rate each of the following:
- What are the positive results you hope to achieve?
- What is the overall dollar value? (Tip: you can use our free Subscription Growth Calculator to help you forecast revenue).
- How hard will it be to implement?
- How long will the entire project take?
- How much will it cost?
Some Quick Caveats:
- Identify which projects are dependent on other projects. If you find one that’s dependent is high in benefits but low in costs, bundle in the cost and benefit of the prerequisite project.
- Be sure to get input from your pricing committee. This has to be a team effort to succeed.
5. Establish the long term vision.
Over time you will find more pricing projects that you’ll need to include. Or you’ll find that your initial estimates weren’t accurate. That’s OK. This is the best you’ve got for now. You can always make adjustments later as needed.
At this point, you should have enough information to paint the long term vision. What does your company look like five years from now in terms of pricing?
See if you can write this vision in a way that others in the company can read and understand.
6. Prioritize! Start with high impact / low cost projects.
Finally, choose a couple of key projects with high impact and low cost. Get the pricing council’s buy in and then work with the pricing committee to make it happen.
7. Measure the results.
Measure the results!!! As you get positive results, it will give you more influence with the pricing council and the pricing committee for the next project on the list. Also, be sure to pass around the credit. Everyone will know it was you, but make sure you give credit to everyone else who worked on the project.
8. Consider bringing in a pricing consultant.
A pricing consultant can assist you in your pricing transformation, from step one all the way through to the end of your pricing transformation. You can chose to bring in a consultant right at the beginning of your project, or at some point in the middle if you aren’t seeing the results you were hoping for.
There are several ways a pricing consultant can help:
It may be helpful to have the project lead have a pricing expert by their side as they are doing the one-on-one interviews. In most cases, your pricing consultant will be someone who knows pricing, but doesn’t know your products or your company. Together, the two of you can determine the right projects and initial steps to take for success.
A pricing educator is able to train your entire organization on the basic pricing concepts that are vital to the transformation. Likely, these are topics would look like the following:
- ‘What is value?’
- ‘How To Do Price Segmentation’
- ‘How to Build Product Portfolios with Impact’
A pricing consultant can help with the implementation of any given initiative, especially when it comes to creating the process.
If you’re in the middle of a pricing overhaul and you’re feeling ‘stuck’, check out our Pricing Mentoring Program.Tags: pricing strategy