Impact Pricing Podcast

Ep138: Benchmarking Competitors’ Prices: Is It Worth the Effort with Monica Sinha

 

Monica Sinha is a Price Benchmarking Lead and Senior Manager at Capgemini. She has over 15 years of experience in the Finance sector which includes experience with the business finance team of Tech Mahindra, the commercial management office at Accenture, brokerage department at Karvy Computershare Pvt. Ltd., and corporate finance department at Tata Finance Ltd.

In this episode, Monica shares how benchmarking increases your confidence in winning deals. And she also talks about when benchmarking truly becomes helpful — that’s when teams work together to truly connect with the customer to attain the best possible final price for a quote.  

Why you have to check out today’s podcast:

  • Find out how benchmarking helps validate the final price
  • Learn how benchmarking helps increase your chance of winning the deal
  • Find out how you go through benchmarking the competitors’ price and the nuances that are involved in it

              

When you are in the pricing line, then I think you need to have a very holistic view. We just cannot go with taking the cost and add the margin, and derive the price out of it. You need to have the entire team aligned into one. 

Monica Sinha

           

Topics Covered:

01:11 – How she landed into pricing

02:32 – Pricing compared to a recipe

03:46 – What benchmarking suggests

05:19 – Benchmarking as a validation check

08:18 – The way benchmarking is done and the nuances involved in it

13:03 – The challenges that come with benchmarking

16:08 – Doing post-mortem analysis to what led to a difference in price after benchmarking

17:21 – How to find out what price the competitor is charging

20:07 – The one thing that helps you win a deal

20:41 – How do we benchmark value-based pricing

23:14 – Monica’s pricing advice that can significantly impact one’s business

         

Key Takeaways: 

“It is so much of confidence, where benchmarking is there, where benchmarking is built to validate. And in fact, I would say that the chance of winning a deal increases by many notches.” – Monica Sinha

“Benchmark gives you a sense that yes, you are close to that price, or you’re very far off, then probably there is some mistake that you’re doing in estimation or something somewhere. So, let’s just recheck how you’re doing it. So benchmarking is a very good instrument to validate the final price that you’re going to submit.” – Monica Sinha

“The one major thing that is very important is that if we have to really give a winnable price if we want to really understand what the value that the customer is looking for, what should be the correct price for it, then all of these team members, they need to align and work together. And they need to understand that they should have some connection along with the customer so that whatever the final price that they are coming up with is the price that should be ultimately quoted.” – Monica Sinha

             

Connect with Monica Sinha:

              

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.)

Monica Sinha  

When you are in the pricing line, then I think you need to have a very holistic view. We just cannot go with taking the cost and add the margin, and derive the price out of it. You need to have the entire team aligned into one.

[Intro]

Mark Stiving 

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the documented relationship between them. I’m Mark Stiving; today, our guest is Monica Sinha. And here are three things you want to know about Monica before we start. She comes from a background in Finance and Sales, which is always a good start. She’s currently a senior manager at Capgemini and has been working on benchmarking for over five years now. And I cannot wait to talk about benchmarking. And she’s addicted to numbers, as am I. So, this will be fun, at least for us left-brain geeks. Welcome, Monica.

Monica Sinha 

Thank you, Mark.

Mark Stiving 

How did you get into pricing?

Monica Sinha 

See, I actually, I had started my stint with the FPMA role. I have been a finance person MBA finance. It was all about variance analysis, forecasting, tracking levers that can improve contract income, etc. I was doing this for almost five years. And then I thought, well, I am comparing actuals with the contract prices. But how do these numbers that we see in contracts are computed? It will be great to take the role of the other side when I am myself finalizing the price to be signed in the contract. And then I got an opportunity where I was not only creating the price, but also comparing it with the actual once we have won the project. And the project is like I just grabbed that role. And that is how I just got into pricing.

Mark Stiving 

I think those of us who are numbers related when we see this thing called price get all excited about it. We think that’s a really cool thing. And the truth is we feel like it’s numeric. But at least for me, as I got it more and more into pricing, I realized that it isn’t really about the number. It’s really much more about how people perceive value of our product. Have you had a similar experience or aha moment?

Monica Sinha 

Yeah, certainly. In fact, I would say that pricing is quite complex; it is not so simple that you just put some number and compute and add some margins to it and just get the price out of it. In fact, I would say it is a mystery. It is like a recipe. Every recipe has different ingredients. And even if the ingredients are the same, processes are so different. And as a final dish, the chef selects a recipe based on what the guests like to eat. So here, our guest is the customer, and what is it that the customer wants to eat? What is it, what is the value that the customer wants to see? The price has to be based on that. So, it is so different from one customer to another; you just cannot apply the price you use for one customer for another.

Mark Stiving 

I love that analogy. You’re absolutely right. As a chef, I may have a whole bunch of ingredients in my kitchen. And there are several different things that I could make. But I want to make what the customer wants. That’s lovely. Oh, man. Okay, so now, first off, just tell me what benchmarking means to you. And since you’ve been in benchmarking for so long, let’s jump into the topic that we’re really curious about today.

Monica Sinha 

So, see, benchmarking, what it suggests is, what is the price, ultimately, that can lead us to winning a particular deal. Or a price what normally our competitors have been quoting in a particular deal. That is what it suggests as the benchmark price. When you are pricing a particular deal, there could be different numbers or different ways in which you can price. But then ultimately, what is the price that will finally, at which you will be able to convince the customer. Where if you compare all the prices, all the deals that our competitors have been quoting or we have been quoting in the past, from there the price that it will derive — that is what indicates the benchmark.

Mark Stiving 

Okay, and so I often teach companies that we want to do value-based pricing, of course, and value-based pricing at its simplest form is somebody who’s going to decide between my product and your product. And what they’re going to do is they’re going to say, ‘Okay, what are the prices of the two so what’s the difference in price,’ and they’re going to say, ‘Is the more expensive one worth it? Do I have, do I get enough value that’d be willing to pay that much more in order to get the more expensive version of that?’ And so, I teach this all the time. And a question that comes up regularly is, well, I don’t know how much my competitor charges. That’s what benchmarking really is it?

Monica Sinha 

Yes, true. And that is what we are trying to do in benchmarking. We are trying to get what is it that the competitors quote? And that is what we have created in our database — to understand that this is the price the competitors quote, and normally they are winning the deal. And not only the competitors, what we ourselves put in the deal that we have won in the past? That indicates the benchmark? Did you use any deals in the future? I mean, basically, we are not just doing the pricing without having any knowledge. I would say this is more like a validation check in front of you; you are doing a solution. You are doing some effort estimation; you add a cost and a margin and derive the price. But how good is that price? Is that price really sellable? Is that price, something which our competitor would be quoting is that price at which I would have sold in the past? Benchmark helps validate data. Benchmark gives you a sense that yes, you are close to that price, or you’re very far off, then probably there is some mistake that you’re doing in estimation or something somewhere. So, let’s just recheck how you’re doing it. So benchmarking is a very good instrument to validate the final price that you’re going to submit.

Mark Stiving 

Yes. And so, if I were thinking of benchmarking, first off, the really easy version of benchmarking is I’m going to sell a consumer product online, and I have a competitor who’s selling a consumer product online. So I go to their website, look at what price they’re charging, and say, wow, I got it. Right. So that was super easy in terms of benchmarking the price of my competition. The problem we have in a lot of these big B2B projects, where they’re probably custom work, is how do I have any clue whatsoever what my competitor will charge given that this project isn’t like all these other projects that we’ve quoted in the past. Right? And so that’s the big challenge. Now, if I were in your shoes, I could tell you how I would do your job. But I would love to know how you do it. Let me toss out how I would do it, and then you just say, ‘Yeah, that makes sense doesn’t make sense or, no, no, we can’t do it, because I’d love to hear your thoughts.’ But what I would probably do is try to estimate how it is that my competitor came up with their price, if I’m assuming they’re doing cost-plus pricing, which I’m not a fan of. But if I’m assuming they’re doing cost-plus pricing, then I have to estimate their costs. And then I could estimate what price they would charge. Given enough samples, I might be able to create the formula that says, here’s how they do their pricing, or at least here’s how I can get close to guessing what they’re going to do. And so now in this next deal, here’s what I think they’re going to price because I have an estimate of their formula. What do you think of that?

Monica Sinha 

Correct. In fact, that is what we do, bring it out. We decrease it is from some of the advisors, that these are the competitors, these are the prices that our competitors are putting, and we create a database of that and then from there, we derive that okay, this is the price generally around 25th percentile or the 50th percentile median based on the competition if the competitor is an IPP player, it’s a global player, how the price is varying based on the kind of I mean, not only just that, it is also about the country. So, there are several other things, not only that, even the complexity which is involved. So, it is not as simple as that; there are many things involved in it, nuances, which are involved in the benchmarking. Benchmarking just cannot; if you’re just using the numbers just like that, then it may become actually a very, very problematic thing. Because if you’re just picking up the numbers that you would have picked up from a particular deal in the past or what generally the competitors quote and instead of being useful, actually you may be bringing a lot of harm to the pricing approach that you’re going to go with. Because, you know, what happens is that every RFP requirement is so different; there are so many nuances involved in it. And my competitors, whatever they have been quoting, would have quoted for a different or altogether a different kind of environment. And I really just pick up that price. No, there are so many things that we should be taking into consideration and that is where I find a lot of challenges. And that is where I get cautioned. Also, being part of the benchmarking team, because I have been into the role of pricing into the finance side of it where I was, questioning the sales team. How can you say for sure that this is the price that you should go with? Because in this specific case, there are so much of non-standard services. So, with the complexities involved, you just cannot pick up any price from the benchmark. And you can say that, yeah, go ahead and use this price. At some point of time, you have to do some bottoms up cost-plus margin also, for certain segment of the services, which we call value-based pricing, I would say.

Advertisement 

Pricing decisions feel risky. How nervous are you knowing you need to raise prices? When, where, and how much should you raise prices, so you don’t lose customers or lower your rate of new customer acquisition? It’s risky enough to make you want to put it off till next year, along with any growth. But pricing doesn’t have to be such a mystery. When I work with clients as their go-to resource for pricing advice, I help them better understand the value of their products, and how their buyers use price to make purchase decisions. We jointly create strategies they’re confident implementing. I can do the same for you. Together, you and I apply pricing frameworks to your price increase initiatives, or your new product launches, or even moving to new pricing models like subscriptions. The best pricing decision you can make right now is to gain access to proven pricing advice. Take some risk out of your pricing; learn more at impactpricing.com/advisor. I look forward to working with you.

Mark Stiving 

So first off, I think it isn’t fair to salespeople; I’m going to take a salesperson side for just a second. It isn’t fair to salespeople to say, ‘How do you know this is the right price to charge?’ Because I don’t think anybody ever knows the right price to charge. And so, what we’re really trying to do is make our best estimate given all the information we have. And so, it’s certainly fair to say how did you come up with this price? Or why do you think this one might be the winning price? But there’s no chance that they know that that’s the right price?

Monica Sinha 

Right? I agree 100%.

Mark Stiving 

And then what I heard you describe, which I thought was brilliant, is, I can’t just look at the price my competitor charged last time; I really have to think through how my competitor got to that price? So, are they getting resources out of a different country to do that? Or is it a different country that’s quoting it, and they have different margin requirements in that country? So, there are lots of different things that are going to come into play, ‘Oh, by the way, maybe they don’t have the capabilities we do.’ And so, they’re going to take a lot longer to do a specific task then we will take to do that task.

Monica Sinha 

At this point, I would say that the customer is not at all interested in what is my cost and what is my margin; the customer is just interested in a price and what the customer is willing to pay. So, from a price benchmarking perspective, we can say that yes, this is the price that the customer is willing to pay, and that is what signifies price benchmarking, that this is the price that you should go with. But the only challenge with price benchmarking is that it gives you the price, but then it does not give along with it, the nuances involved in it. By nuances, what I mean is that let’s say if, to give an example, if we are talking about firewall management. Firewall management, for one account, would be so different from another. I’m not talking about complexity, like how many network parameters being supported, but something like additional non-standard services, some additional value that we are bringing on for one customer which we will not probably be giving for another customer. So that makes benchmarking, not really as simple as it appears to be. There are certain additions or upgrades that we have to make on top of it some uplift or downsizing, you know, so that it becomes really cold behind all the decisions.

Mark Stiving 

Yeah, so Monica, I want to make sure that we’re using the same language for a second. When I think of the word benchmarking, I think of it as I am trying to guess or estimate what my competitors are charging, what prices they’re setting, but that doesn’t dictate what price I charge. That’s just my best guess at my competitions’ decisions they’re going to make. Another price I charge, I might find myself in a situation where we helped write the RFP. The executives all love us. They need a technology that we have that nobody else has. And so, I could run my benchmarking, but it doesn’t mean that I couldn’t be 20, 30 40% higher than my competitors’ price, and still win that deal. Because of all the value that we’ve sold to the customer. Yes. So, I love this topic. Now, how do you validate your benchmarking? How do you make sure or at least get better and better at guessing what your competitors are going to charge?

Monica Sinha 

It is. So, I did not get that question.

Mark Stiving 

That’s okay. In the world of benchmarking, we’re collecting data. And every time I get a new data point, let’s pretend that I predicted that my competitor would charge a million dollars. And in truth, they only charged $700,000. Now, I want to know, why was I so far off? What process do you guys have a process? Or do you think through a process that says, ‘Oh, here’s how I modify the way we make guesses in the future because of this new data point that came in?’

Monica Sinha 

Yeah, we do; we try to do that kind of post-mortem thing to understand what led to the difference. And there are different analysis which comes out of it; one could be because of maybe too much of high contingencies that we are keeping too much, of course, that we are adding, or maybe in the first round itself, we are just trying to go to the customer with too much of solution, with too much of solution architecture into it, which was not really required. The customer was just looking for a very, very simple solution for their very basic requirement with a simple price and a simple solution. But here, just to show too much value-add for the customer, we are just over architecturing it and giving a very high price. But these are some of the incentives where we have seen that our customer has won a day, because they went really simple with the solution and the price.

Mark Stiving 

Yeah, that brings up two big questions for me. One is, how do you get the prices? That question often comes to me, by the way, when I’m teaching, how do I go find what price is my competitor charged? And let me just stop there? How do you find your competitors’ prices?

Monica Sinha 

You know, sometimes I find the competitors’ prices are quite close to the price that we are keeping. I don’t really see too much of a difference there. But I think it is more of a pricing model, how they are putting it in front of the customer. That is what matters.

Mark Stiving 

So, Monica, what I was really asking is, how do you learn how much the competitor charged?

Monica Sinha  

So, this is something that comes from sales insights. Okay, after the deal has been closed, that is from that specific deal, which we actually really were part of the deal. Otherwise, there are many advisors who are there to help with that reports, who provide the prices that competitors generally quote. And there are several advisors there who are providing those reports. And from those reports, we get an understanding of the prices that our competitors are putting; names are not there, who are the competitors, but the prices are there. Overall, the average prices.

Mark Stiving 

Got it. And so, if the names are not there, does that also imply that they don’t tell you what the proposal was? So, they’re charging, you know, a million dollars, but they didn’t say what they were going to deliver for a million dollars? So, you don’t really know what they were selling? Is that true or not true?

Monica Sinha 

Yes, it is true, and it is more like value-based pricing. So, this is I’m talking about the interval, where it is all related to resource unit, where we’re talking about per server price per database price. I’m not talking about the hardware; I’m talking about the managed services prices. So, we get, that person, well, this is the price that the competitors have been putting on 25th percentile or 58%. And so, we get numbers like this and also bifurcation in terms of Indian competitor or global competition.

Mark Stiving 

Got it. This whole concept of benchmarking is pretty fascinating. Do you guys see real differences in results because you do benchmarking?

Monica Sinha 

Yes.

Mark Stiving 

Yeah, I can imagine.

Monica Sinha 

Just think of a scenario where you’re adjusting pricing without having a benchmark main picture. And then a scenario where you are doing pricing and then benchmarking is also there. It is so much of confidence, where benchmarking is there, where benchmarking is built to validate. And in fact, I would say that the chance of winning a deal increases by many notches.

Mark Stiving 

Nice. And I love the fact that you said the word confidence, too, because salespeople who are confident, are much more likely to be successful if they believe in what they’re selling.

Monica Sinha 

In fact, yeah, they know. Because whatever they have been thinking, of a price that is validated by a report coming from the data from our competitors itself that, yes, this is the price that have been quoted in a deal, which was sold. So, they know that; yes, this is the price where I should be around.

Mark Stiving  

Yeah, this has been brilliant. Before I ask the final question, Monica, I got to ask, what about benchmarking should I have asked you that I didn’t ask.

Monica Sinha 

Sorry.

Monica Sinha 

Was there anything about benchmarking that I should have asked you that I didn’t?

Monica Sinha 

I think the only thing about benchmarking — that is the cost and margin. I think we touched upon this topic. And also, another thing, I think something which is important is value. How do we benchmark value-based pricing? I understand I have read it, and I know that you are a big advocate that pricing should be based on value. But we can benchmark all the standard services. But how do we benchmark value-based pricing? I’m not talking about brand value here. I’m talking about some additional transformational things that we can bring to the customer. How do we benchmark that? That is something that becomes really, you know, complicated and difficult. And I don’t think I mean, at least I find it very difficult. And I really wonder how anyone can do benchmarking of products there?

Mark Stiving 

Yeah, first off, I think that benchmarking value, although it’s a really interesting concept, I’m not sure that’s the right answer. I think we want to do benchmarking to guess how much my competitor is going to charge? And once we know how much our competitor will charge, the question becomes, what price should we set? And when I think about value, I think about how we get away with a price that’s higher than my competitors’ price. And the way I get away with that is by selling value. So, it’s not about benchmarking it. It’s about looking at individual customers or buyers who say these are the things that really matter to us. And then us as a company being able to say, this is what is valuable to that customer, here’s how we do it’s so much better than our competition, not about price just about what we’re going to do and deliver. And then what’s that worth to my customer when we can deliver this. And all of a sudden, the customer says, ‘Oh, look, I’m going to make another $10 million, because I’m buying from you because of these things that you’re doing to help me.’ That says that we should be able to charge a pretty, pretty large number higher than my competitors are charging because of value. So, I don’t think it’s easy, maybe not even possible, to benchmark value. But the concept of value is crucial.

Monica Sinha 

Correct. Right.

Mark Stiving 

Yeah. So, nice Monica. This has just been fascinating. Let me ask the final question, though, what’s one piece of pricing advice you could give our listeners that you think could have a big impact on their business?

Monica Sinha 

When you are within the pricing line, then I think you need to have a very holistic view; we just cannot go with taking the costs and add the margin and derive the price out of it. You need to have the entire team aligned into one — the sales, the pricing team, the price benchmarking team, your solution team; everyone needs to understand what is it that the customer is looking for? What happens is that all of these teams, sometimes especially the pricing team, and the sales team, and the solution team, are working in silos, so they don’t really understand what it is that the customer is looking for. The one major thing that I find is, which is very, very important, is that if we have to really give a winnable price if we want to really understand what is it that the customer is looking for, what is the value that the customer is looking for what should be the correct price for it, then all of these team members, they need to align, they need to work together. And they need to understand that they should have some connection along with the customer. So that they are ultimately, whatever the final price they are coming up is the price that should be ultimately quoted.

Mark Stiving 

Yeah, I think that was brilliant. It really does take a big team, not a big team, but it takes collaboration, cooperation, and a lot of people’s insights to say, yes, this is what really makes sense. So absolutely brilliant. Thank you so much, Monica; we appreciate your time. If anybody wants to contact you, how can they do that?

Monica Sinha 

They can contact me through LinkedIn or Gmail. My Gmail ID is MonicaSinha1002@gmail.com.

Mark Stiving 

Excellent, and we will put that in the show notes, as well. Thank you for listening. If you enjoyed this, would you please leave us a rating and a review? Also, don’t forget to check out my new book, Win Keep Grow: How to Price and Package to Accelerate Your Subscription Business, currently available on Kindle and Audible. Hardcopy will be available in bookstores on October 5. Finally, if you have any questions or comments about the podcast or pricing in general, feel free to email me at mark@impactpricing.com. Now, go make an impact!

Related Podcasts