With over 25 years of experience in pricing strategy, analytics, and customer relationship management, Adrienne Gordon is passionate about empowering businesses to leverage pricing as a long-term strategic advantage and a path to self-actualization.
In this episode, Adrienne delves into the profound impact of CEO decisions on overall company pricing. She explores the concept of ‘value killers’ such as the ‘Bob Factor’, the ‘Lester Factor,’ and ‘Cheryl factor’ illustrating how individual actions and outdated models can undermine pricing policies. Additionally, she discusses the importance of setting clear pricing goals, understanding price distribution and variance, and leveraging pricing processes to maximize profitability.
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Why you have to check out today’s podcast:
- Delve into the crucial role of leadership in effective pricing and value delivery within a company
- Find out common pitfalls and strategies in pricing that will help you understand how internal processes and individual actions can impact a company’s pricing power and profitability
- Discover actionable advice for immediate impact enhancing your company’s pricing approach and proactive value creation
“If you look at pricing as a process, you will self-actualize as a company.”
– Adrienne Gordon
Topics Covered:
00:51 – How she found herself in pricing
02:26 – How her role in product management helped her develop valuable skills in product segmentation and customer insights
03:55 – Differentiating these two companies she manages, Pricing Empowered and Price Space
06:36 – The role of leadership, specifically CEOs, in pricing strategy
09:09 – Explaining the concept of “value killers” using the metaphor of “Bob”
11:40 – The negative impact of allowing CEOs to negotiate prices and discussing the concept of parameters of empowerment
14:29 – Another value killer: The Lester factor
16:55 – What makes ‘’Cheryl factor’ a value killer and the extent of profit leaks this causes
20:15 – Three key actions leaders should take to drive pricing in their companies
24:19 – Differentiating between intentional and unintentional price variance
25:14 – Adrienne’s best pricing advice
Key Takeaways:
“If the CEO doesn’t believe that you can proactively price and influence markets with your pricing, then the company has no faith in it either.” – Adrienne Gordon
“Parameters of empowerment: to me sometimes actually retracting some permission and then testing your value proposition, pushing pricing a little bit so that the organization can see the worth doesn’t fall apart when you do that. And releasing that empowerment back, I think, actually, can help companies evolve.” – Adrienne Gordon
“I often make recommendations, do not put on your parameters of empowerment 5, 10, and 15. Put on 4.72. Somebody’s going to have to do the hard work to figure out what 4.72% discount is. And that’s a good thing.” – Adrienne Gordon
People/Resources Mentioned:
- McKinsey: https://www.mckinsey.com
Connect with Adrienne Gordon:
- LinkedIn: https://www.linkedin.com/in/adrienne-gordon-0a93129/
- Website: https://www.pricespace.com/
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.)
Adrienne Gordon
If you look at pricing as a process, you will self-actualize as a company.
[Intro / Ad]
Mark Stiving
Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the convergently evolving relationship between them. I’m Mark Stiving, and our guest today is Adrienne Gordon. Here are three things you want to know about Adrienne before we start. she got her pricing chops at Parker Hannifin oh, a few years ago. that feels like a company that puts out lots of great pricing people. She’s been in consulting since 2008 and she currently runs two businesses, Pricing Empowered and Price Space. And by the way, she’s put out some really nice videos lately, which is why I asked her on the podcast. Welcome, Adrienne!
Adrienne Gordon
Thanks. I’m glad to be here.
Mark Stiving
Hey, how’d you get into pricing?
Adrienne Gordon
Just like everybody else, it was not intentional. so started my life as an engineer. Hated it. got myself into a product management role at Parker Hannifin, and at the time I was in my twenties and I had just gotten out of school and there was a consultant calling on Parker saying, you got to do this strategic pricing thing. So they chose my business unit at Parker for a pilot because of complexity. So it was the solenoid valve division, so complex configured products, lots of different channels, lots of different end markets. And, anyway, long story short is they said, we’re going to do the pilot there. We need a product manager, it’s a technical role, they need to use a computer. They look down the aisle. And I was the only one without white hair. I grew up using a computer, right? So I was very young. And so I knew a little bit about programming at the time, so they asked me to do it. And then it was incredibly successful. It became a global initiative. So I was asked to move to Cleveland and help roll out the program to 138 unique companies at Parker. And that was the beginning of the end.
Mark Stiving
So you were the beginning of pricing at Parker?
Adrienne Gordon
I was. I was the first pricing manager in 1999.
Mark Stiving
Wow, that’s pretty impressive. That’s amazing. And what I also like is that you came from product management, and I often think product management is kind of like the best job you can have in business because it’s like you’re running your own business even though you’re not.
Adrienne Gordon
Yeah. At Parker it was a little bit light relative to some of our clients. So they didn’t really put that much energy into the product or autonomy into the product management role. I think my title was actually market specialist, it was about product management light. but it did teach me a lot about thinking about product segmentation and customer voice and things like that, which really helped. Yeah.
Mark Stiving
And it’s pretty fascinating because theoretically product managers should know what we know, but they don’t. And once you get into pricing, you start to realize, oh, I’m working with product people and marketing people and salespeople and finance people. so having that really broad perspective helps a ton.
Adrienne Gordon
Yeah. I agree. And I think one of the really cool things when I worked in corporate and I started having a pricing team work for me is, I figured out pretty early on that we could make a pricing problem any problem we wanted it to be. So I would tell my team members like, figure out what your next role you want to be. Like, if you want to go into finance or if you want to go into marketing, and like, just tell me and we’ll get you on a project and we’ll make it about that. because we could touch anything right. In pricing. It was really fun actually.
Mark Stiving
So I’ve actually never heard it said that way before. That’s really cool. So instead of thinking we run everything, it’s like, well, what piece do you want to be into? We’ll go get that. That’s really great. Okay, so tell me about the difference between the two companies that you run Pricing Empowered and Price Space.
Adrienne Gordon
So Pricing Empowered, that company was founded in 2011, boutique, consulting firm just focused on pricing. Our clients tend to be pretty large, B2B, so either private equity groups or publicly owned. and it’s a very high touch environment, right? So we tailor all of our engagements. they tend to start as projects that end up in long-term relationships. and because it’s so high touch we only take a handful of those a year. I’m involved in every single one of those projects. Yeah, they’re very complex. So we get very integrated into leadership teams. Price Space, that is the brainchild of mine. It’s been a couple years in the making where, one, I understood that a lot of, well, all companies need help in pricing, right? Everybody does.
There’s not a lot of us, Mark, that have been doing this for 25 years, like you and I right out there. So what ends up happening is those of us that have the experience tend to be working with the bigger companies. But everybody needs us. And soI was thinking through how could I, number one, get all this experiences in my head out and so that it’s usable for more companies, but also be able to offer to more companies. So Price Space is actually what we’re calling an online consultancy, but it’s basically a platform based on a framework. And most of the tools are actually automated. So, basically it is being offered under a very standardized approach. So the methodology behind it, and there’s some technology behind it. We do offer like an hour of consulting a week with Price Space as well. But it’s not going to be, we’re not flying out. We’re not going to be onsite with the client there.
Mark Stiving
I got to say from the way I run my business, even an hour a week feels like a lot.
Adrienne Gordon
Yeah. So, right now it’s me. The strategy will be me and probably doing some of the executive coaching on the platform. However, my team members are trained now in change management. They understand pricing policy and process. So when you’re talking to a consultant in Price Space, it could be any of the Price Space experts.
Mark Stiving
Nice. Well, let’s jump into what we really were going to talk about today, and that’s leadership. So the first thing that jumps into my mind when I think of leadership’s role in pricing is how big is the company? And so then what’s the level of the leadership? So, when does the CEO have to be involved? So is the CEO of Merck involved in pricing, right? So go ahead and pontificate on that for a minute or two.
Adrienne Gordon
Yeah, so I mean, there’s the tactical reality of how often a CEO actually has to touch something, but I would argue the CEO of Merck absolutely has a role, is a leader in pricing. And from my perspective, it really comes down to, can the leader set a culture that says, I can control the pricing of my organization, I can control the market. And if they can’t say that with confidence, then it doesn’t matter what happens any level lower, right? Because if the CEO doesn’t believe that you can proactively price and influence markets with your pricing then the company has no faith in it either. Does that make sense what I’m saying?
Mark Stiving
So it makes sense, but I think I would’ve said it differently. So let me try saying what I would say and then let’s discuss it and see if it makes sense. I would argue A CEO has to be responsible for making sure we’re delivering value to our marketplace, that everybody in the company is focused on delivering value. And I think that’s a much bigger problem that they have to deal with. And so obviously we can’t price unless we deliver value. And I would say the pricing part is how do we capture the value we deliver? So, am I way off or…
Adrienne Gordon
No, I think, I totally agree, but I think, the test that I’ve been playing with recently is I think a lot of times leaders, they direct the company to create value, the company creates the value, and then the leadership team doesn’t settle in to this is the value we’re creating in a way that’s confident enough. So they end up undermining their own company in their own understanding of the value proposition. So, I talk a lot about value killers. So who’s your value killer? It better not be you, CEO. So for instance in one respect they’ll say, we have this fantastic value proposition, we’re doing great things in our markets. And then suddenly they say, hey, wait a minute, this competitors just did this. We’re going to have to go react to it. And to me, that actually internally reduces pricing power the moment A CEO does that.
Mark Stiving
I got to say that I dearly love the phrase value killers. Now I know what went through my mind, but I want to know what goes through your mind when you say that. give us some examples.
Adrienne Gordon
So actually I did a talk recently and I’ll give you my little metaphor. So, I talk about the Bob factor, right? So, Bob is a pretty seasoned salesperson at a company’s client, right? They’re an executive and, they know how to play the game. So the value killer for Bob, right? It could be Bob, it could be the CEO, but Bob calls and says, hey, I got your quote. And, it’s lower than, I mean, it’s higher than your competitor, and I need you to do something. And like a sales rep will say, well, I’d love to do that for you, Bob, but I can’t because it’s below my authority. So, but let me go talk to my boss, right?
So the guy goes and talks to his boss, and then the VP says, oh, no, no, it doesn’t really match our value proposition. So they keep going up and thenBob finally says, okay, I’ll go ahead and I’ll put in the order. And then Bob gets to the CEO at some customer relationship thing or whatever, and says, hey, they said that they really wanted to help me out here, but just this one time. And they weren’t able to do it. And then the CEO says, oh, yeahBob, you’re our most important customer. And I know it’s not going to cost us a lot to do this, and it’ll give me some goodwill, right? These are words we always hear goodwill, it’s not going to cost a lot. And so this year is, yeah, this one time we’ll just go ahead and do it, and they take off. But what ends up happening is that, like the Bob factor doesn’t just like lower prices for a moment. It undermines the VP of sales, it undermines the sales rep, it undermines the policy. And so that becomes a value killer. You could say Bob’s the value killer. You could say the CEO is the value killer. It’s something we see every day though, right?
Mark Stiving
Yes. And so, by the way you left out, this is a strategic customer. That’s one of my favorites.
Adrienne Gordon
Yeah. Strategic, right?
Mark Stiving
Yeah. One of the things that I’ve always taught is if you have any power, never let your CEO negotiate prices. Right? Because your CEO wants to get the deal done, wants to show that they’re powerful and have influence, they’re going to give away everything quickly. But what I really like about the story you just told is, it actually affects the entire company, right? It wasn’t one deal we just impacted, we just impacted the way we as a company do business.
Adrienne Gordon
Yeah. And then if you’re that sales rep, why would you push back the next time? Why would you, right? It’s going to eventually get boiled up and then the leadership upon leadership levels, they’re just going to say yes. So, you just stop pushing back.
Mark Stiving
Yeah. And so you could make an argument just on that example you gave us that we need to design really good, well thought out escalation policies. When do we approve a discount? When do we not approve a discount? Does everybody know this is going to happen? Because of that phrase, strategic customers come up all the time. And so just because a salesperson says those words, are we going to take the deal? Except a huge discount.
Adrienne Gordon
I had a client at a well-known household brand name. There was a woman there who used the words parameters of empowerment. It has stuck with me for the last 10 years. Love that term. Parameters of empowerment. and it’s really about, to me sometimes actually retracting some permission. and then testing your value proposition, pushing pricing a little bit so that the organization can see the work and doesn’t fall apart when you do that. And then releasing that empowerment back I think actually can help companies evolve. So I don’t know what your thoughts are on that.
Mark Stiving
Have you ever seen the chart? I used to use this chart all the time. It had, what percent of your revenue comes at what discount percentages. And they’re usually these big jumps or big bars at 5%, 10%, 15%. And you ask people, well, why do you think that happens? And they go, oh, because it’s multiples of five. But it turns out that’s not why it happens, because those are discount authority levels for salespeople, sales managers, and VPs of sales. And so, people just discount to their authority level. It’s like a given that I’m going to give this away.
Adrienne Gordon
That’s interesting. I did not see that study, but I do often make recommendations. Do not put on your parameters of empowerment 5, 10, and 15, put on 4.72. Somebody’s going to have to do the hard work to figure out what 4.72% discount is. And that’s a good thing.
Mark Stiving
Nice. And the other thing, I don’t know if you’ve done this one, but what I found moves those numbers at all is if you want to be, when I was using the 5% number, I would say to a salesperson, if you want to discount below 4%, all you have to do is send an email to your boss to explain why you’re discounting below 4%. And you just shifted that number from five to four because nobody wants to write that email.
Adrienne Gordon
Interesting. Yes. Makes sense.
Mark Stiving
So, okay. Another value killer. Do you have another example? By the way, I really love that phrase.
Adrienne Gordon
The Lester Factor. All right, so here’s the story about Lester. I believe this is a manufacturing thing but I believe that almost every manufacturing company that’s been around for a handful of decades has somebody usually named something like Lester, which is really hysterical, but it’s always, but this person is somebody who’s very, very intelligent and was not in pricing. So it’s typically going to be an engineer, some statistician, a chemist, something like that, who got pulled into pricing at one point. And it really started as an estimation model or whatever. But anyway, so they built a pricing model like in the sixties, seventies, whatever. And then it just became part of the culture, right? And then, what ends up happening with the Lester factor is why would anyone screw with it?
Because it kind of worked, right? Like over all this years, they have this pricing model. And so, it builds out some target price to go ahead and they set it. And what my pushback on that is if you have a model that’s been around for 85 years from some smart guy who went to MIT, who’s just no longer with the company it’s really lazy and it’s probably limiting the industry because… So here’s the theory, according to Adrienne, and I’ll let you put holes in it. a hundred percent of the business that you want is either at or below market of what the customer would be willing to pay, otherwise they would’ve gone above. So the Lester factor, if you’re just setting and forgetting it, then a hundred percent of the business coming out of Lester’s model was either at or below what it could have been. And if you’re not testing where you potentially could be in current days, then by definition it is constraining profit and revenue. So, anybody who’s allowing a Lester model to exist is a value killer.
Mark Stiving
Yeah. That’s A, a no brainer, right? That’s absolutely true. And B, if it’s 80 years old, or if it’s eight years old, my guess is in manufacturing it’s a cost-plus model. Yes. And so odds are really, really good that we haven’t thought through what we are really delivering value to the customers? What are they truly willing to pay? How are we going to capture more of that? So I agree a hundred percent that having these really old pricing models, ugh, is tough. It’s tough. Okay, this is fun. Do you have another one for us?
Adrienne Gordon
The Cheryl factor.
Mark Stiving
Let’s hear it.
Adrienne Gordon
So Cheryl is one of my favorite people. she was a pioneer woman in business before women were really getting themselves entrenched. And she’s been around the company forever. If anything ever needs to get done, Cheryl knows how to do it, right? And so the Cheryl factor is she knows all of the customers. she’s probably been in the company for 35 years, whatever. And she knows the customer’s kids names she’s got great relationships with everybody. And so the Cheryl factor is I say when the Bob Factor fails, right? If instead Bob called the CEO, said, was that the golf outing? And said, can we meet the price CEO , says, I got to go with my team on this. What ends up happening is Bob calls Cheryl and says, hey, I just got this invoice and it was different than the last price paid, right? And Cheryl’s just very trusting. She’s got these great relationships with all the customers, right? And she knows how to get things done. So even though there’s a parameter of empowerment somewhere, right? Cheryl’s going to go in and just like adjust an invoice. I call it post invoice adjustments, price adjustments, right? So she’s going to go in and fix it because she’s going to trust Bob that all the things that are supposed to happen happened. I mean that’s a process breakdown, right? Cheryl’s part of the process breakdown that we see a lot.
Mark Stiving
So someone and I talked, I don’t know, it was four or five years ago, maybe longer, and you had said that you were spending a lot of time on the Cheryl factor. You didn’t use those words, you said on the quote-to-cash model or something like that? I’ve never spent much time there. Is there really a lot of loss, a lot of profit leaks in that space?
Adrienne Gordon
I think it depends on the organization. I go in and I start looking for chaos, right? So when I’m kind of profiling a new project, I’m guessing you probably see the same thing. I typically see companies that are just starting their pricing journey have one of two stages or one of two positions. They’re either in total chaos of pricing, right? So sales can negotiate whatever. Prices are all over the place. You have these huge scatterplots or there’s zero differentiation. That’s it. So everybody’s being treated the same. When we find chaos, then the question becomes, is the chaos all at invoice or are there other things going on? So some people just use the price waterfall, as part of that. So it’s a way of using the price waterfall, I guess. So if there’s a lot of chaos happening after the invoice, then we focus on it.
Mark Stiving
Nice. So let’s jump back to leadership and pricing, if that’s okay. What is it that you think leaders can and should be doing that will really drive pricing in the company?
Adrienne Gordon
So again, I come back to settling in on this idea that proactive pricing is a thing and making a commitment to it. Typically what we actually challenge leadership with three things to start when we start engagement number one is we challenge them to think through the relationship between value and price by segment. So we take like the McKinsey map where they have, if they’re totally aligned, the market’s not shifting. If your price is above your value, you’re losing market share. But we actually ask them to score it for all their major segments as a leadership team and then distribute it across their organizations. Because if, I know we’re using it a little bit uniquely in this way, but the reason why we ask them to do that is because a lot of times the leaders say, oh yeah, in this segment, we’re here in this segment, we’re there our price and value, they’re totally aligned, and then they send it to their companies.
And what we’re looking for is not the answer that we get from their organization, but the distribution. So if we get totally different answers for the same segment of the business or where they’re pricing value, then we know there’s a problem. And this is a cultural problem. So we always ask the leaders to do that first. So see how aligned your organization is, and even understand your value proposition. Number two is we ask them to make a commitment how much better you’re willing to get to. And a lot of times what we hear in the beginning of engagements is, oh, I don’t care. Just as long as they get better. And I’m like, no, we need an actual number. How much better in price are you going to get this year? You can get 1% better at anything if you look at it, right? but until you actually put a number for a goal, the organization’s not going to react, right? And then the last we ask…
Mark Stiving
What’s that number look like? Is it like a 1% price improvement?
Adrienne Gordon
We ask them to give us a number. How much are you going to put out as a goal to set how much more price you’re going to get this year because of working with us? What’s your goal? Right? now we can cascade a goal in any way we want, right? But at the end of the day, if they don’t put a goal out, there are experiences when leaders just say, just get better this year. Nothing happens. The people need something to measure because it’s a sign of confidence, if that makes sense. It’s a sign that the leaders believe it can happen. and it’s very simple, right? Whether they get the goal or not, I don’t know if I even care but until they actually say there’s a goal, it’s going to be a compromise project for us. And then the last thing is that they take the time to actually assess best practices. And I think that’s important for a leader to do a self-assessment based on just some criteria so that they become a little bit more aware of what good looks like.
Mark Stiving
Yeah, I actually love all three of those. the goal and I find fascinating, what kind of goals? Well, first off, as we’ve seen inflation over the last few years, do the goal numbers go up with inflation?
Adrienne Gordon
it’s above and beyond inflation, right? So inflation happens, that’s a macroeconomic event. I’m agnostic to it. You need to keep up with it, right? I mean, that’s just good business, but to me it’s what are you going to do above and beyond and in deflation? What are you going to do? less than, right? What’s your less than number in deflation?
Mark Stiving
Yeah. I actually found a lot of clients didn’t raise prices during inflationary times. I was like, really? This is the best time ever? And you’re falling behind if you’re not doing it,
Adrienne Gordon
For sure.
Mark Stiving
Alright, and by the way, I remember the question I forgot to ask, for a second. Talk about price distribution for a second. Do you think price distribution is a good thing or a bad thing? Let’s call it price variance. Is price variance a good thing or a bad thing?
Adrienne Gordon
So it depends on what price variance is, right? So there’s intentional price variance or price discrimination, and then they’re unintentional. So to me unintentional, uncontrolled, it’s, I won’t call it that, it’s opportunity, right? This is where we’re usually working with our clients to make a lot of money very quickly. intentional is almost required, right? Because if you, by definition, only have one price, you treat everybody the same, you are serving the lowest common denominator, right? I think that’s where you’re going with the question.
Mark Stiving
Yeah, exactly. That’s exactly right. And I just wanted to hear your thoughts on it, hear you say that, but that’s absolutely true, right? Everything you just said, so awesome. Adrienne, we’re going to have to wrap this up, but can I ask you the final question? What is one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?
Adrienne Gordon
If you look at pricing as a process, you will self-actualize as a company.
Mark Stiving
Okay, that’s going to take a little while for me to process.
Adrienne Gordon
I’m working on some white papers right now. So, when I finally get around to getting a book written, it’ll be about that.
Mark Stiving
Okay, so give me some, for instance, give me some examples. What are you thinking here?
Adrienne Gordon
What am I thinking? so I just did a webinar this morning about how most companies think pricing power only comes when you innovate, right? So you innovate and you create pricing power. I’m challenging that because I think if you do the right pricing process, it will naturally evolve you to innovation. And innovation then all becomes part of self-actualization. So, and just, I’ll step back very simply, if you think about it, if you go ahead and you test segmentation in your business, right? So I’m going to segment my business, I’m going to put some hypothesis around which segments have less pricing power than others, right? Whatever. And I’m going to differentiate the price. I go out and roll it out in the market. Some will stick and some won’t. And so when they don’t stick, you have two options, right? You either lower prices against your hypothesis, or you innovate. Those are the only two, right? And so companies who start with the pricing process and look at it that way, and they use that trigger when something doesn’t stick as a moment to change the value proposition, they naturally go into a more innovative company. So that’s the thought process I’ve been playing with.
Mark Stiving
Nice, nice.what I find fascinating is I think you and I think almost identically everywhere, with the exception of you use the word price, and I use the word value, but we’re almost always thinking the same things, right?
Adrienne Gordon
I’m evolving Mark to your thinking. So, yeah. The program that we’re using in Price Space, by the way, is called Return on Value Blueprint.
Mark Stiving
Nice. And by the way, I’m not trying to tell you you’re wrong. I’m just, I try to figure out how other people think and I find it fascinating.
Adrienne Gordon
Absolutely. I am admitting that I am moving closer to your position on this one.
Mark Stiving
Right, Adriene, thank you so much for your time today. If anybody wants to contact you, how can they do that?
Adrienne Gordon
You can find me on LinkedIn. My personal profile at Adrienne Gordon, you can find me. Also, we have a LinkedIn for Price Space, and you can also contact, there’s a contact form on www.pricespace.com.
Mark Stiving
Perfect. And to our listeners, thank you very much for your time today. If you enjoyed this, would you please leave us a rating and a review? And if you have any questions or comments about the podcast or pricing, feel free to email me, [email protected]. Now, go make an impact!
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