Impact Pricing Podcast

#425: Why It’s Worth Paying for Pricing Consultants with Dick Sobel

Dick Sobel was with Emerson for 21 years where he mostly worked on pricing roles. Currently, he is the managing director of PricePoint Partners, a company that helps clients achieve significant gains in price realization and profitability with salesforce implementation utilizing cloud-based Acuity Margin Management BI software.

In this episode, Dick talks about the work they do at PricePoint Partners as he points out the importance of assessment and consulting in coming up with optimal solutions to clients’ problems. He also touched on the topic of AI interference in the pricing world.

Why you have to check out today’s podcast:

  • Learn the work that PricePoint Partners does, the range of clients they serve, and how they could help your company in pricing
  • Find out why you can’t rely on AI alone in doing prices and why AI can do better in B2C than in B2B
  • Find out why today is the best time to raise your prices

Inflation’s persistence is here to stay for a long time. And if you’re not doing something right now, you are really missing out.

Dick Sobel

Topics Covered:

01:49 – How Dick got into pricing

04:40 – How Emerson did pricing before, and how they moved to value pricing as time went by

06:50 – The work that PricePoint Partners does, and the range of clients that they support

08:21 – Is PricePoint Partners a software company, or a consulting company?

10:23 – What prompts companies to focus on pricing

13:19 – Does PricePoint Partners charge for assessment?

14:58 – Why assessment is an essential part in consulting, and why you should definitely pay for it

17:25 – Why you should be careful in using AI, and why pricing people and clients are still more comfortable 

22:02 – Dick’s pricing advice

23:32 – Connect with Dick Sobel

 

Key Takeaways: 

“Somebody has to be in charge somewhere that can at least gather the crew together and make it [changes in pricing strategy] happen.” – Dick Sobel

“At least for the people that I deal with, I don’t feel comfortable having or I don’t think they’re even comfortable in having black box artificial intelligent price recommendations where “Okay, here’s the price you should charge for this product, for this SKU”. And it’s given to the salespeople arbitrarily. There’s got to be this human interface still. And so, yeah, you can look at it, but be careful.” – Dick Sobel

“This idea of “Well, you know, we’re just going to try to hold the line”, you keep doing that, you won’t have a business.” – Dick Sobel

 

People / Resources Mentioned:

Connect with Dick Sobel:

Connect with Mark Stiving:   

 

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.)

Dick Sobel

Inflation’s persistence is here to stay for a long time. And if you’re not doing something right now, you are really missing out. And by the way, your vendors are not sleeping, your costs are rising. And this idea of “Well, we’re just going to try to hold the line”, you keep doing that, you won’t have a business.

[Intro]

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 discovered relationship between them. I’m Mark Stiving, and our guest today is Dick Sobel. Here are three things you’d want to know about Dick before we start. He has been the managing director of PricePoint Partners for 13 years now. Before that, he was at Emerson for 21 years, and most of that was in pricing. You’re going to hear his New York accent, who lives in Ohio, and he used to play tournament chess. Welcome, Dick.

Dick Sobel

Thank you, Mark. Appreciate being here.

Mark Stiving

Oh, come on. Make the accent worse for us. We want to hear it. 

Dick Sobel

Well, you know, just forget about it. I’m here.

Mark Stiving

Forget about it. Okay, nice. Hey, how did you get into pricing? 

Dick Sobel

Well, it’s a good story. I spent a good 20 years plus at Emerson in various capacities in management, marketing, sales, finance. It’s a great company, financially-driven. And back in the mid-nineties, I had the opportunity with a colleague to meet with the vice chairman and others to talk about pricing. And at that time, we started talking about the different pieces: price, cost, mix volume, sales carryover, matrix, pricing, where all the different buckets were. And as a result, Emerson, which used to do both growth conferences and profit reviews in St. Louis, started a profit review, which said that “You’re going to grow your business, but you’re not going to be able to use top line growth to get the profit.” And so, they added a pricing piece, 45-minute pricing piece that they presented to senior management. And there, you talked about a five-year plan for pricing.

But the fun part was that after you got finished doing all that, the president of Emerson would say, “Well, that’s great, Dick. I want another 2% on top of everything else that you’ve just presented.” So, one thing led to another, and from that, Emerson, has now went much further over the years, and they went into the high level pricing software and so forth. But it was marketing and finance and sales and strategic planning. Just a great place to work. And so when it came to an end, I decided to move back during the Great Recession in 2008, 2009, they moved all the divisions, and I was the last to go in my grouping.

And so, I decided to fulfill my passion in the pricing and margin management area. And so, I met Ralph Supansic, who was the founder of PricePoint Partners, and we hit it off, and the rest was history. Unfortunately, last December, Ralph was getting ready to get some bone marrow transplant for his leukemia that he had, but he contracted pneumonia and passed away. So, we’ve been restructuring the company. We’re strong.
We’ve held on to all our clients, and we’re getting new clients.

Mark Stiving

Let me ask you about the company in just a second, but first I want to ask about Emerson in the old days and get your perspective on something. Emerson is at most a hardware company, at least they were back then. And I view most hardware companies as doing cost plus pricing of some sort. And is that the way they thought back then? And do you think they’ve moved away from that?

Dick Sobel

Yeah, they did, because everything was based on cost and gross margins. But as time went by, they actually began to move – and of course, now they’re into software as well – more towards value pricing. And I was involved in that to some extent initially, because basically, we wanted to talk about “It’s not just features and functions. What value are you providing your clients, your customers, actually?” And as you know, each one of those statements, value statements, had a quantitative value to it. And it really helped the technical salespeople who are not used to consultative selling and not used to talking about value that begin into the various divisions of Emerson. I think today, like many of the bigger companies, they’re really into it. So, they’ve gone the full journey from nothing, really, to a full fledged, well versed in the pricing field.

Mark Stiving

Nice. And partly driven by you.

Dick Sobel

Initially, yeah. And I had a couple of colleagues that one guy became director of pricing, strategic pricing for the company back then. And time went by, they’ve added other people. And I think they have that function clearly, and they still have these profit reviews, and the pricing is one of the most difficult presentations because everybody has an opinion, and if you kind of get off point, they’ll let you know.

Mark Stiving

I have so much experience with companies realizing that they don’t understand how much their customers value their products. And I am sure Emerson is not different. And if someone asks you, “So what’s your customer willing to pay? How do they value this?” That is just such a hard question for people to answer.

Dick Sobel

It is.

Mark Stiving

Hey, let’s talk about your company for a minute.

Dick Sobel

Sure.

Mark Stiving

First off, what do you guys do? What’s the range of clients you typically support?

Dick Sobel

We service what we call a small to mid-range marketplace, which is anywhere between about $10,000,000 and say $250,000,000, $300,000,000. Although one of our clients actually grew to $450,000,000. But that’s not the rule, because generally, when you get up to that area, they can begin to afford some of the more sophisticated high-end software companies like Resilience and the Vendavos of the world. But about five years ago, I developed an application using Tableau as a platform where all the algorithms, all the information needed to produce 80% to 90% of the benefit from the analysis in that program and the fact that they were already a SaaS company and the ability to then put all this stuff online so that our clients can then access it 24/7 was a big attraction. And with their purchase, with Salesforce purchasing them as well, gave us access to all of the connectors in the Salesforce environment.

And so, we’re probably the only company, a consulting, small consulting firm in the country that actually has a real powerful pricing and margin management program based on a Tableau platform. 

Mark Stiving

Do you think of yourself as a software company, or a consulting company?

Dick Sobel

Well, we’re a consulting company that has moved and transitioned our business to have the SaaS, because projects tend to come and go, and then the SaaS as continuing revenue. And we’ve been successful with that, and we’re very pleased with that.

Mark Stiving

It was funny. I was just talking to one of our pricing colleagues the other day, and they were saying how they were at a really big name consulting firm a long time ago, and he wanted to write the software to do the work, and they said, “No, you don’t realize. We sell hours.” So eventually they learned, “Okay, selling software is a really good thing to go along with selling hours or selling consulting.”

Dick Sobel

So, I might just tell you, too, that from a scaling perspective, we don’t have any proprietary software. What we have is a proprietary application that is built into the platform. And so, we have clients that use tableau, power BI, and so forth, and they can get a lot of information from that, but they can’t get the information that’s relevant. Because of the price, the cost, the mix, the volume. We do price elasticity on a SKU level where it makes some sense, not on the broadest level and other things.
It’s worked out pretty well. And yeah, we also stay with our clients and we consult, and if they want to do value pricing, we’ll measure the benefit of the value pricing, that sort of thing. And we’ll help them get through the beginnings of that program. They want to go real sophisticated. There are companies out there, Mark, that specialize in the transformation of a company going from Cost Plus to value-based pricing. 

Mark Stiving

What do you think prompts a company to say, “Hey, it’s time for us to go focus on pricing.”? So, a company is growing. Probably the CEO set the prices early on. They grew for a while, and it’s like, “Okay, now let’s go do something in pricing.” What was the trigger there?

Dick Sobel

Well, it’s funny. And I kind of get the answer to that from the leads that we get, because when you get a lead, it’s very vague. They say, “Well, we have a pricing problem, and we’re not happy with what we’re doing. We don’t believe our data.” These are people where you would say, “Yeah, you don’t believe your data? How do you do a PNL?”
So, what happens is that when we first start talking to a client like this, we’re going to say, “Look, what are the three home run deliverables? I don’t know what your problem is, but what would you like to have happen when we’re all said and done?”
And when people tell you that, that gives you the initial trigger as to where to go. And what you generally find is exactly what you said: They’re generally doing cost plus pricing, excel spreadsheets. It’s a very diverse situation. Different people who have different responsibilities. Management is afraid of the sales force. They don’t want to upset the Apple cart.

But you kind of have to start at the C-level. Somebody has to be in charge somewhere that can at least gather the crew together and make it happen. The other thing is, there’s been a professional pricing society that has had a big impact. I think some of the major pricing software companies do a lot of marketing and promotion. And then all of a sudden, a CFO or CEO is having a staff meeting and say, “Hey, what’s going on here?” And they find out they’re not doing anything. And so then, they go out and they look for a pricing consultant or somebody not really knowing what to do.
And so, what you want to find out is, “What are your home run deliverables are, and then what are you doing right now? What is your current strategy?” And then you get like the old honeymooners or humming and humming like Jackie Gleason, because they really don’t know.
And when you get a client like that, then you can begin to work with them. And what we do, Mark, is we do an assessment. We’ll take their data and we’ll put it into the tool. We’ll perform an assessment. “Give me a year or two of your data. We’ll look at all the fundamentals”. And now we know what their business looks like. And then we ask them, “How do you financially account for your business?” And we kind of tie the thing together because if you can’t take all this work we’re doing and tie it to the PNL and show how that’s done, they understand that. And so, it’s kind of a process.

Mark Stiving

I’m going to make the assumption the answer is yes, but do you charge for the assessment, or is that something that you give away for free?

Dick Sobel

Well, it goes two ways. If we just want to look at the data, give me a couple of months of data just to see what it looks like. I’ll have a sense just from that – because I’ll still run it through the tool – and I’ll have a sense of all those factors I mentioned to you, because the tool, it’s all ready. Take it. And then I’ll have that conversation, and then I’ll recommend, “Hey, give me a couple of years of your data. Or more.” And that’ll be charged for because they have to have some skin in the game. And then from there, we’ll move from there to some consulting, and then from there we’ll move into a subscription where they can get this information monthly, 24/7, as many users as they want.

So, it’s kind of like a process and it works pretty well. 

Mark Stiving

Nice. So, what I want to point out to all the listeners, by the way, is notice that he’s charging for the assessment. And if you think about a doctor for a second, a doctor is not going to prescribe something for you until they know what’s wrong. But you don’t get to go to the doctor to learn what’s wrong without paying for it, right? Someone pays for it. And so, we’re actually getting paid to do the assessment. What I also like about that, by the way, is oftentimes, people don’t want to pay you consulting money until they know they have a problem that you can fix.

Dick Sobel

That’s a good point. I hadn’t thought of it that way.

Mark Stiving

So, the assessment helps a lot in that respect.

Dick Sobel

And in fact, I had a client, this prospective client that I’m working on, where they didn’t want to do a subscription. And in fact, their company is going to go to a different kind of a BI tool and they want to keep this as a project. They don’t want to get it to interfere with what the corporation wants to do, what the company wants to do. And so, what we’re going to do there is combine the consulting and the assessment and provide them recommendations and conclusions and let them have access to the online tool for about a month, which they’ll pay for, just to really get all the in-depth analysis and then they’re done. And that’s fine also.

Mark Stiving

Sure. We help clients.

Dick Sobel
We help clients. And by the way, when they see it for the first time, their eyes are open. The other day, I had meeting with a prospective client and they had their data in there; and they looked at that and it was like eyes opened wide. They had never seen it expressed that way, because with BI, you get nice looking dashboards and pictures and graphs and data, and it’s all point and click. There’s no training takes about an hour. And after that, we say “You just play with it, run with it. We’re always going to be here for you. And if you have any questions…”

And by the way, if you want something custom for yourselves, you have something special you want to look at, we’ll be happy to do that.

Mark Stiving

What I think is fascinating about what you’re doing, and I’m going to bring this into the super future now for a second. I’ve been thinking way too much about Chat GPT lately. And the problem with AI and Chat GPT is we don’t know what to do with it. We know that there’s so much power there and so much capability, we just don’t know how to use it or what to do yet. And so, if we tie that back to your clients and the perspective your clients have, they don’t have the same knowledge you have about pricing, and what are the pricing strategies you might use, or what are the pricing metrics you might look at. And so, you’re essentially handing them “Here’s what to do”, and that gives them the ability to go make much smarter decisions.

Dick Sobel

That’s correct. And I will tell you I have looked at Chat GPT. I actually put an annual subscription in and started to see what the potential is. I will tell you this: Some of the BI programs like the Tableau, they now have some machine language. If you go to Salesforce, they have Einstein, which is an AI based platform. And I’ve been pushing Tableau and I’m still on it to get a better understanding how I can use that. I will tell you this: At least for the people that I deal with, I don’t feel comfortable having or I don’t think they’re even comfortable in having black box artificial intelligent price recommendations where “Okay, here’s the price you should charge for this product, for this SKU”. And it’s given to the salespeople arbitrarily. There’s got to be this human interface still. And so, yeah, you can look at it, but be careful.
And yet, some of the stuff that I have does have “what if” analysis, doesn’t use AI. But it gets pretty close to what’s required. I think you got to be careful. Human interface is always going to be a “know your business” before you rely on an algorithm that is being generated by artificial intelligence. At least if someone asks me, “Well, how are you calculating this? What’s going on behind the scenes?” I’m happy to tell them that it’s not being generated by a computer.

Mark Stiving

So, anytime you use a black box, it’s really hard to answer the question “Why did you choose this price?” And people want to know the answer to that question. “Why did you choose this price?” I could see how eventually, AI can get to where it answers that question, too. “So, here’s why we chose this price. These are the 20 factors. This is the factor that was most important and why we chose this one.” And I could see how they could get to that answer, but I don’t see it today. The other great thing is, in the world you live in, which is mostly B2B industrial world, there usually isn’t enough data to go use AI on that anyway.

Dick Sobel

That’s a good point, especially in the smaller companies. In the smaller companies, I’ll give you an example where AI could be used. Now, we have an application called Wallet Share. This is one where you look at a particular group of customers in a particular market, and the products that they’re buying from you, and sales regions. And you say, “Okay, this group of customers are in the electric utility business. They’re buying six of your products. Here’s a new customer or another set of customers, only buying two or three.” So, I can identify that and actually point out the products that they could be buying and then show them some quantitative information about that. Now, I do that without AI. But with AI, you could probably do a lot better job, because you could look at the whole universe and you could pull all this together and it works easily.

But that’s not selecting a price. That’s taking lots of different factors and attributes and coming up with some quick outputs that are useful to a client. So, that’s one of those.

Another, we can do churn analysis very nicely, but I think it could be done more dynamically and with more rigor with AI. But in smaller companies, when I say smaller, zero to $10,000, to $250,000 to $300,000. They don’t have enough data. They’re not selling enough of those particular SKUs to customers to really be able to use it.

Mark Stiving
Yeah, I agree completely. And so, I tend to think AI and pricing go well together in the B2C world, and I’m possibly going to take that over pretty soon. But in the B2B space, I think it’s pretty tough, especially if you’re going to have a direct salesperson there, because they have to be able to explain the value.

Dick Sobel

And we don’t touch B2C for that reason. There’s too much data. We can hand millions of transactions, but B2C is just another world.

Mark Stiving

Yes, exactly. Dick, we’re going to have to start wrapping this up, but let me ask you the final question, my favorite. What’s one piece of pricing advice you would give our listeners that you think could have a big impact on their business?

Dick Sobel

Well, I think that, first of all, they have to realize that they have a problem. They have to understand that, particularly in the inflationary environment – and I did a webinar on that one time recently with a client, a company – considering the economic conditions, the inflation. If not now, never. Because you have an opportunity at least to go with the flow. You can point to different charts of commodities, although things have come the other way a little bit. But inflation’s persistence is here to stay for a long time. And if you’re not doing something right now, you are really missing out. And by the way, your vendors are not sleeping, your costs are rising. And this idea of “Well, you know, we’re just going to try to hold the line”, you keep doing that, you won’t have a business.

And so, I think the economic situation, inflation, is a good reason. If you’re not doing it now, you’re never going to do it. That’s how I feel.

Mark Stiving

I agree completely. I’ve been preaching, “Raise prices now”. Not across the board, right? Do it intelligently.

Dick Sobel

I’ve seen that.

Mark Stiving

I’ve been preaching it. It’s like, “come on”. It’s funny, I get a lot of pushback from some of my pricing friends. It’s like, “No, we can’t go raise prices. That’s not a good advice.” It’s like, “Well, yeah, it really is a good advice right now.” And I like the way you just said it. “If not now, then when?”

Alright, Dick, this has been fascinating, and thank you so much. If anyone wants to contact you, how can they do that?

Dick Sobel

Yeah, they can get me at [email protected]. They can get us at the website at https://pricepointpartners.com/ and on LinkedIn.

Mark Stiving

Alright, and I’m sure we’ll have some of those URLs in the show notes. and to our listeners, thank you so much for listening. If you enjoyed this, would you please leave us a rating and a review? You can get instructions on how to leave a review by going to ratethispodcast.com/impactpricing. And finally, if you have any questions or comments about this podcast or pricing in general, feel free to email me at [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.

 

Tags: Accelerate Your Subscription Business, ask a pricing expert, pricing metrics, pricing strategy

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