Impact Pricing Podcast

Ep112: Communicating Your Value through Pricing with Chris Barth


Chris Barth is currently the Vice-President of Pricing at Pitney Bowes Commerce Services. He used to be the Vice President of Finance Operations at Newgistics.

In this episode, Chris talks about how to sell on value, matching the markets’ needs with a solution and tying it up with an appropriate and justifiable price.

Why you have to check out today’s podcast:

  • Learn how to bring salespeople to sell on value and at price points that make sense in the market
  • Find out how to articulate value and translate it to price
  • Find out a commission algorithm that makes salespeople earn more when selling on value but earns lower when selling below the target price

“Really understanding what you’re trying to do as a business has many functions of what they’re working on, what’s on their roadmap. And ultimately, how is that translating into the pricing and that story that you’re trying to communicate to your customers through your sales team.”

 – Chris Barth

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Topics Covered:

01:18 – How his pricing career started with Dell

03:05 – What does special pricing mean?

03:39 – What contributed to his status as VP of Pricing

06:14 – Matching up value with price

08:00 – The time in his career when he pivoted his thinking on pricing and considering the value components

12:14 – The challenges of making salespeople sell on value instead of price

15:34 – Putting yourself in your customers’ shoes when trying to set up price

17:47 – Structuring commission plans for salespeople to sell on value rather than just giving discounts

21:48 – Coming up with an algorithm that incentivizes bigger commission those that sell on the sweet spot and higher

24:51 – Chris’ best pricing advice that has a great impact on your business

Key Takeaways:

“You’re always thinking about how can I hold the line on price. It’s really trying to match what are the needs of the customers with the solution that you’re offering and what is the appropriate price?” – Chris Barth

“We didn’t have this grand network; we didn’t have assets. And here, we had to sell value and convince retailers to pay for our solution. And then, in turn, we had to coach our customers on how to position it with their consumers.” – Chris Barth

“All the things that go into what you’re trying to do as a business have got to translate into your positioning in the market and what you’re trying to do. So, when I say that, it’s just understanding your business strategy.” – Chris Barth

“When you’re trying to set value, then, put yourself in the customer’s shoes. Would you buy this product? Would you pay for the solution? What need or problem are you trying to solve in the market? And what is it worth?” – Chris Barth

“What you want are sales folks, really being able to articulate the value, matching that value to a customer’s needs and being able to capture the highest possible price that can tie to the value and optimizing your profit as a company.”  – Chris Barth

 

Resources / People Mentioned:

 

Connect with Chris Barth:

 

Connect with Mark Stiving: 

  • Email: mark@impactpricing.com
  • LinkedIn

 

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.)

Chris Barth 

Really understanding what you’re trying to do as a business has many functions of what they’re working on, what’s on their roadmap. And ultimately, how is that translating into the pricing and that story that you’re trying to communicate to your customers through your sales team.

[Intro]

Mark Stiving 

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the fluid relationship between them. I’m Mark Stiving. Today, our guest is Chris Barth. And here are three things you want to know about Chris before we start. He is currently VP of Pricing at Pitney Bowes Commerce Services. He was a VP of Finance Operations at Newgistics, which was acquired by Pitney Bowes and I love finance people who get into pricing. And as a hobby, he likes to travel internationally. And he’s been to a couple of places I am really jealous of. He’s been to Galapagos in Greenland. Welcome, Chris.

Chris Barth 

Thank you very much, Mark, for having me today. I’m excited to be here with you.

Mark Stiving 

That’s going to be a lot of fun. So, how did you get into pricing in the first place?

Chris Barth  

Yeah, that’s a good question. And to be honest with you, I kind of stumbled into pricing. I have a finance undergrad degree from the University of Texas. And coming out of school in the mid-90s. I really thought I would take a traditional FPNA role, budgeting forecasting, that’s what I was trying to do. That’s where my mind was at, I was looking at some opportunities out of college. And one of them was a finance consulting role. And another one was an opportunity to work at Dell, in Round Rock. I think most of your listeners would know who Dell is. And that fabulous story here in Central Texas. It was a tough choice. Actually, the consulting role was going to pay more. But in the end, I decided to take this job with Dell. I came on as a temporary employee. And I worked in special pricing there at Dell for roughly about a year as a temp. And I worked in different segments there. I started out in, what they call, the education, state, and local government segment, which was pricing computers and services for K12, higher ed, and state and local government. Then as the buying seasons shifted, I moved over into the federal government and the third quarter that year, went over to enterprise accounts, and then ultimately ended up on the large corporate accounts segment where I was hired on full time. I spent another year and a half there. About two and a half years at Dell — started my career in the late ’90s, which was a great time to be there.

Mark Stiving 

And so, you were doing pricing on big deals at Dell, is that a good word?

Chris Barth

That’s correct, Mark. So, really, special price.

Mark Stiving

Nice. Okay. Right, by special, meaning non-standard.

Chris Barth

Exactly. This would be bundled pricing; these would-be larger deals. When you think about federal governments or higher ed institutions that are buying a number of computers or servers or laptops, they’re looking for a bundle price. They’re obviously wanting a better deal than what you could go and secure buying one or two computers.

Mark Stiving 

Definitely. Okay, so here we are 25 years later. How did you become a VP of pricing? What skills, what were you able to do to get to that status?

Chris Barth

Well, I’ll tell you, I started out at Dell, and it was a blessing. You think about pricing as a business function in companies. It wasn’t a huge focus, I would say, in the ’90s like it is today. It’s getting much more recognition and companies. There’s just a key component to profitability in companies. I kind of stumbled into it, like I said, and I really enjoyed it. What I loved about pricing, both at Dell and through the rest of the companies that I’ve worked for in my career, is just you’re in the middle of the action. You have your fingers on the pulse of the business, you have to know so much about what’s going on with companies. You have to know what they’re trying to do their business strategies; you’re understanding competitors, what the sales folks are saying, what the customers are saying, what product marketing, you really get immersed in terms of what’s going on in the market. Whereas in traditional finance or an accounting role it’s much more localized, if you will, in terms of doing your function, a lot of repetitive things around closing books forecasting, but not so much having your fingers on the pulse of what’s going on in the market, which is really exciting because companies never standstill. The market never standstill or not very long. You want to know what’s happening. Who are the entrants? Are folks going out of business? Or the customers asking for? What are the pain points? How are you evolving as a company, what’s happening in the market? It just really became interesting to me; I quickly lost my interest in just kind of a traditional FPNA role and wanted to pursue that path. And I loved working in pricing because the impact it could have on profitability and companies. I’ve had some FPNA in my career, but the majority of it, I always come back to pricing. I just have a passion and a love for it.

Mark Stiving

So, I absolutely love that answer. And it made me want to ask you about 20 other questions. But the one question that’s highest in mind is, people who aren’t in pricing, often think that pricing is about this one lever that we have to pull. Am I going to lower my price, I’m going to raise my price? But when you’re trying to manage deals or close deals, and you only have this one lever, which is price, what you’re really trying to do is look at all of the other levers out there and say, ‘Can we really hold our price?’ ‘What can we do not to have to lower this one price?’ Does that seem like a reasonable way to describe this?

Chris Barth

Yeah, in some ways, I mean, you’re always thinking about how can I hold the line on price. But there are some situations where if you can peel back, what I’ll call certain features of your product or your service to offset the price trade-off, where a customer is not going to get the full value that somebody’s paying for a premium service or a premium product. That’s one avenue that you can take, but it’s really trying to match the customers’ needs with the solution you’re offering. And what is the appropriate price? That’s the key, is trying to match up the value, what the customer is looking for, who you’re competing with, and trying to figure out, what do I do with the price here? And there’s never a one size fits all. Everybody’s different. The needs are different; who you’re competing with in the situation the size of the customer. Who’s the incumbent? Where do you stand in the marketplace? Which is, are you somebody that has a great reputation? Are you a premium brand? Are you a new brand? It’s all those dynamics. There are 50,000 ways, you’ve got to think about how do I set the price? And what is the appropriate price? And sometimes you just have to say, ‘No, that’s okay.’ I think a lot of folks, particularly in sales, you can’t be everything to everybody. Sometimes, you have to say no; sometimes a customer just doesn’t fit what you’re trying to do as a business. And that’s okay.

Mark Stiving 

Absolutely. I love the fact that you use the word value, and we’re trying to find the appropriate price. And one of the questions that I really want to ask you, because you come from a finance background, is, do you remember when you made a mental switch from cost-plus pricing or thinking the pricing is based on costs, to thinking about pricing is based in value?

Chris Barth 

Yeah, that’s a really great point, Mark. That comes back to my career trajectory. I’ll talk about where I started at Dell. And then how I evolved my thinking, and when that actually changed, because it’s a great point when you first get out. When I started out at Dell, I was young, I was 21 years old, 22 years old, very young; didn’t know a lot about pricing and its field. And at that time at Dell, we’re talking about 1997, 1998, 1999, they had a cost advantage over everybody. Okay, if you’ve never read the book or the story, go get it. There’s a book published by Michael Dell out there that talks about that business model, the just-in-time inventory, the vendors across the street, super interesting. I’m not going to get into it. But long story short is, that was easy pricing for me at the time, we could win all day long because we had a cost advantage. I didn’t really, there was some talk about competitors and who we’re competing against, thinking about volume and those types of things. But at the end of the day, Dell had a cost advantage when I was there. And it was very easy to win business. You didn’t have to think about so much of how do I differentiate? How do I position my value? That was less of a conversation. It was interesting to me there. But it wasn’t the way that you really should think about it. And I didn’t pivot my thinking until a little bit later on when I got to logistics in a startup mode. I went from Dell, I spent a few years in Telecom, but really where my thinking shifted was when I started up at Newgistics in 2003. And here was a really a startup company, not quite an incubation stage. But this was a company that was shifting their business model. They were rethinking how they did business, how they went to market. And at the time that I had joined March of 2003. They had, I want to say it was less than 10 customers. One of them was actually one of the investors, so that was kind of easy. They’re one of your customers. But we had to think about how do we go to market? How do we sell? How do we position value because we don’t have a cost advantage? We’re in a logistics industry trying to solve a return solution, pioneering a new solution, something that somebody hadn’t really thought about, coming out of the dot com boom, how do you get returns back to customers? And it wasn’t a big focus of anybody, really. And when I say anybody, our competitors would have been somebody else that could have handled the package UPS, FedEx, DHL, USPS, they were all focused on deliveries and getting products out, no one had solved the issue of, this shirt doesn’t fit, or I just don’t like it. I bought it online, how do I get it back. We had to really think about, we didn’t have this grand network, we didn’t have assets. And here, we had to sell value and convince retailers to pay for our solution. And then in turn, we had to coach our customers on how to position it with their consumers. We had to think about the entire chain of how do we sell this solution. And it was just a great point in my career of learning how to pivot our thinking and justify the price you’re charging, thinking about all these value components.

Mark Stiving  

I especially like the fact that you had to convince your customers that you are adding value and help teach them how to communicate that value to their customers. It’s like a double layer of value. This is not uncommon in many places where we’re trying to get our customers to do something new and different. They need to see the light with their customers as well. Exactly. Pretty interesting. One of the things we talked about real briefly, before we started recording, was managing or working with salespeople. And at Dell, you worked on big deals and Newgistics; you’ve been dealing with big deals and big customers. And I assume that’s true at Pitney Bowes, as well. What do you think are the challenges with getting salespeople to sell value?

Chris Barth 

Yeah, it’s, a great question mark. There’s always some good salespeople that have the experience and know-how to do it. And then others are going to sell on price. That’s the easiest path or the path of least resistance, I would say. One of the things that you got to think about is, first of all, there’s got to be good training that typically comes from the product teams that comes from sales leadership. But all the things that go into what you’re trying to do as a business have got to translate into your positioning in the market and what you’re trying to do. When I say that, it’s just understanding your business strategy. And there’s a number of components that go into that, from leadership all the way down to product marketing. You can’t be everything to everybody. That’s a very, very difficult business model. I know that sales folks given the opportunity, they probably would sell anything to anybody if they could make a commission, and it’s going to pay the money. That’s how they make a living. You have to understand their point of view. And how you bring sales folks into the fold of selling value and selling at price points that makes sense in the market. And how you do that is you’ve got first of all, you got to understand the market very well. That’s key. If you don’t understand where you’re winning and losing in the market, it’s hard to understand those data points and how to guide the sales team on where and how they should sell. And then how to tie that into commission plans.

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Mark Stiving

Yeah, let me jump back for just a second. One of the things you talked about was the product teams teaching sales about value. Now, my experience is, a lot of product teams don’t even know the value of their products. And I’m trying to ask you to point fingers at them or anything like that. But I find that really challenging to get product people to understand value, and they’re not even out in front of the customers.

Chris Barth  

Yeah, I think it’s a good point. I’ve had different experiences, to be honest with you with different product teams. Some really do. And they understand how they’re trying to position their product in the market, who they’re competing with, what they’re trying to be. That’s, to me, that’s a really good product manager, and you have others who are… I’ve worked with some that are coming up with a product, don’t really know if the customers are interested in it. And they’re trying to put something out there and see if it sticks, and they have a hard time articulating the value of this. Why would a customer want to buy this? And the way I always think about it, when you’re trying to set value and put yourself in the customer’s shoes. Would you buy this product? Would you pay for the solution? What need or problem are you trying to solve in the market? And what is it worth, that’s how you’ve got to think about it from a customer’s perspective. And if you can’t convince yourself that you would want to buy this, or it’s solving a need, and it’s worth some type of money, but then you have to dollarized that, ultimately, that value into a price is how you’re going to think about it, then you’re probably not going to be very successful. If you’re not thinking about can a customer do this on their own? Can they buy it from somebody else? And who am I competing with? What’s out there? If you don’t know the answers to all that, you’re going to have a hard time articulating value and ultimately translating it to price.

Mark Stiving 

Yeah, I think that was an absolutely brilliant answer. I love the idea of putting yourself in the customers’ shoes and saying, ‘Hey, would I buy this?’ ‘What are the problems I’m solving?’ Let’s assume then that we actually do have product people that understand value; we are able to teach salespeople what value is and means, and let’s assume they even understand it. We also know that price is a lever that salespeople have, and it’s an easy lever to pull. It’s sometimes easier to say I’m going to sell I’ll give you a discount rather than trying to convince somebody why they should pay us the price we should get. You briefly brought up commissions. Is there a way that we can structure our commission plans to give salespeople the authority they need to discount when they need to? But give them the incentive to not discount unless they absolutely need to?

Chris Barth  

Yeah, it’s a great point.  For a lot of folks that are in pricing, I think it’s a miss sometimes in the role. If you think about anybody in a pricing role dealing in a relationship type sale, B2B, where you’re working with sales teams, and really sales are selling. This isn’t you just putting a product on a website, and a price and a promo, and a customer making a decision. This is relationship sales, sales folks, they get paid on commission. And you’re right. The path of least resistance is often to lower the price. So how do you guard against that? We’ve all heard sales folks say it doesn’t matter if I’m getting a 10% commission; 10% of no sales is nothing, right? That’s how they earn a living and if they have to drop the price, and there are no consequences to it, or there’s really no incentive to try to sell value, you’re going to get into a situation where you’ve got potentially some profit leak. And then it’s going to come down to do you have a good salesperson or not? And are they tending to rely on price as a crutch to sell? Or are they trying to sell value? How do you put some guardrails in place to drive the kind of behavior you want with a sales team? I’ll tell you one of the things that we did, I won’t talk about it in detail. But we took a look at the sales commission plan, how it was structured (and there’s different ways to do it) different organizations, a lot of sales comp plans are set either by like a sales ops team or the sales team themselves in conjunction with HR. I think a miss is not engaging pricing or having pricing have some say in that. Pricing should know the market, they should know where you’re winning and losing, what’s going to work, how does that value articulate, and then be able to segment up your business into appropriate price points that are typical for selling. And what you want to do is you want to reward sales folks who sell at or above what’s happening in the market, and you want to pay them handsomely. One of the things that we did is we took a look at the com plans. First of all, we widened the commission plan. It was very narrow before it was a half-point, to say three points. And what you want to do is take a look at that. Salespeople, really good ones that are selling value and selling at or above the market should be some of your highest-paid folks in the company, they are driving your business. And that is an extremely profitable business that allows you to grow, fuel investments, and continue to do what you’re doing as a company. But if you’re always selling on price, you’re leaving money on the table. And it doesn’t mean that you won’t necessarily take that deal. But why should you pay a salesperson a lot of money to sell strictly on price, it just doesn’t make any sense. You don’t need a highly paid salesperson to come in and just continue to float a price until they want a deal. That’s not really selling. In my mind, it doesn’t take a ton of skill to do that. What you want are sales folks, really being able to articulate the value, matching that value to a customer’s needs, and capturing the highest possible price that can tie to the value and optimize your profit as a company.

Mark Stiving

One of the tricks that I’ve always recommended to try to use is that if the pricing team can calculate a target price, and that target price is based on what region is the customer in? How big is the customer? What do we think that customers should be paying us? If we had the ability to say this is a target price, then any salesperson who sold above that price gets a nice commission rate. Any salesperson who sells below that price gets a much lower commission rate? Is that what you’re thinking or something like that, or there’s some other tweaks that we could make?

Chris Barth

Yeah, exactly. That’s exactly how we thought about it, Mark. We have the data by product, by market, by the size of customer, we had everything segmented out. We knew basically where the sweet spot was for selling. And what we did is when we transform the commission plan, we said okay, if sales folks are selling at the sweet spot, let’s make sure they’re making about the same as they were before. We didn’t want to upset the apple cart and introduce some commission plan that all of a sudden, they’re selling what they’ve always been selling, and now they’re making less or worse, making a heck of a lot more. You wanted to keep that even. And what we did is we came up with an algorithm that was kind of an exponential algorithm. As you continued up and sold a higher price and worked harder to sell value, you made a lot more. And the same thing as you sold below what was happening in the market, you made a lot less. It wasn’t linear. And for every change in discount, there was an offsetting change in commission. A lot of commission plans, they just have these bands, which is, ‘Hey, if you sell in this range 10 to 15%, you get X percent.’ Well, what’s going to happen the sales folks are some of them will sell higher than the 10 to 15. But why would you sell anything higher than the 10? You’re just going to drop down to the bottom, if you can, so just doesn’t make any sense. You want to correlate every change in price, even subtle changes to some movement in the commission plan so that there’s a quarter point or a 10th of a point a commission all that adds up in terms of really fine tuning, matching the price point to what the customer is willing to pay, and matching that exactly with the commission payout that you want to give to the salesperson.

Mark Stiving

I think that’s absolutely a brilliant way to think about this. If you’re ever willing to share that math with me, I’d love to see it just to see what you guys did. That’s totally okay, if it’s proprietary. Did you ever read the book Freakonomics? Because probably my favorite story that I’ve told way too many times out of Freakonomics was realtors selling houses. And the fact that, oh, you have to go read this, if you haven’t.

Chris Barth

I haven’t read it. So, I’m going to answer that question now. But now you’ve got me curious.

Mark Stiving 

The best part of this is that they did a research study on realtors, how long a house was on the market, and their average discount. And then they compare that to the exact same realtors when they were selling their own house. And the difference is, when you’re selling your own house, all of a sudden, I get to keep a much bigger chunk. And so that commission really matters. And just paying a straight percentage on revenue just doesn’t incentivize salespeople to behave in the best way possible for the customer. Absolutely love that story. Chris, this has just been a fantastic conversation. We have to wrap it up. And let me ask the final question. What’s one piece of pricing advice you would give our listeners that you think would have a big impact on their business?

Chris Barth 

When I think about what makes somebody really successful in pricing, or what makes a successful pricer (to me) it’s really getting engaged and involved in everything that’s going on in your company. To me, successful pricing folks are some of the most knowledgeable folks in a company. And I say that because you have to know really what everybody’s working on, in terms of, you’re the person or you’re the group that is translating what everybody in a company is working on, into the value and the price. You have to understand how you’re positioned right in the market. What does everybody working on? What is that product you’re working on? What is the IT group working on in terms of data? What is accounting? How does the billing look? Are the customers happy with it? Do they understand their bills, the marketing side of it? Every piece of the business — operations, IT, accounting, billing, you got to understand, is it good, is it bad? How does it compare to what everybody else is doing in terms of your competitors? And are you better or worse? Because when you understand that, you can then translate that into value, you can understand, should I be pricing it above what my competitors are because we’re on equal footing, if you will? Are we doing something better that’s driving more value that’s in demand? Therefore, we should charge a premium? Or are we trying to break into a market, our services are bad, we’re not there yet? Therefore, I’m not going to be able to command a price that my competitors are, and you’re going to have to be a little bit cheaper, if you’re going to overcome that value hurdle. Really understanding what you’re trying to do as a business has many functions of what they’re working on, what’s on their roadmap. And ultimately, how is that translating into the pricing and that story that you’re trying to communicate to your customers through your sales team.

Mark Stiving

It was an absolutely fantastic answer, Chris, and I actually have a corollary that I’ll share with you. And the corollary is everybody in your company either creates or destroys value.

Chris Barth 

I agree with that. 100%. That’s so true, Mark.

Mark Stiving

It’s sad, but it’s true. Absolutely. Episode Number 112. All done. So, to our listeners. Oh, I forgot. Chris, thank you for your time today. If anybody wants to contact you, how can they do that?

Chris Barth

Yeah, sure. You can find me on LinkedIn under Christopher Barth. That’s my full first name or my personal email address is fastercall, just like it sounds fastercall@gmail.com.

Mark Stiving 

Excellent. Now, Episode 112 is all done. To our listeners, please leave us a review. They’re very, very helpful. And if you know the pricing, product people, tell a friend. I would be very grateful. Finally, if you have any questions or comments about this podcast or Pricing in general, feel free to email me at mark@impactpricing.com. Now, go make an impact!

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