Impact Pricing Podcast

Ep155: Four Pillars of Pricing: How to Become More Efficient in Pricing with Vikas Pal Boaddh

 

Vikas Pal Boaddh is the Senior Strategic Marketing and Pricing Leader at Honeywell. He started out as a Software Engineer but has switched careers after getting an MBA in Marketing and General Management. His pricing journey in Honeywell was a happy accident for him. His startup in Food Tech wasn’t working in his early years, so he was introduced to Honeywell’s pricing team. Now, he’s been with them for 10 years.

In this episode, Vikas discusses why value-based pricing is the right thing to do and shares why understanding how your customer thinks is a must in dealing with pricing.

Why you have to check out today’s podcast:

  • Discover how important it is for you to understand the customer’s business first before making them understand how much money they’re going to make once they buy your product
  • Understand the four pillars of pricing frameworks in an organization
  • Find out how you can become more efficient in pricing through tips that will help you avoid repeatedly doing the same thing with progress

              

When you have an opportunity to price something, first, go and try to talk to the customers. 

Vikas Pal Boaddh

           

Topics Covered:

01:44 – The happy accident that led to Vikas joining Honeywell

02:48 – What’s in the cost-plus model that made Vikas passionate about it?

04:35 – Two things to take note of when implementing value-based pricing

05:51 – How Honeywell understands customers and their business

09:37 – Where should pricing sit in an organization?

10:53 – The difference in the roles of a pricing person and a product manager

12:32 – The first pillar in pricing frameworks for an organization

14:03 – The three other pillars of pricing organization

16:19 – The competition of having the credit for the price

18:36 – Where does Vikas put the focus when trying to become more efficient?

21:35 – Vikas’ pricing advice for listeners

         

Key Takeaways: 

“Know the customers inside out. Understand your customer base. If someone doesn’t know [their customers], they will find it difficult to implement value-based [pricing].” – Vikas Pal Boaddh

“It’s the pricing person’s job to talk to the customers. Ask them about all the things which goes in their business, understand them, model them, dollarize them, and then set the price.” – Vikas Pal Boaddh

“As a pricing person, I have a key say in what the price should be, but I just said, the people who own the product – for example, operating managers – they are the people who are kind of holding the price for that. They should be doing a final sign off on that. As a pricing person, it’s my role to provide all kinds of inputs and guidance to help them reach there.” – Vikas Pal Boaddh

             

People / Resources Mentioned:

                 

Connect with Vikas Pal Boaddh:

                    

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.)

Vikas Pal Boaddh

When you have an opportunity to price something, first, go and try to talk to the customers. If you go to engineering or production side, you would get the cost. It will bias you. If you go to the sales of that team, they will say, “Okay, it’s good margin. It’s bad margin.” But again, thinking about margins is, again, cost-plus. So, just sit in the customer’s mind and think from there – what benefit they’re going to get from that product – and then price from there.

[Intro]

Mark Stiving

Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the intuitive relationship between them. I’m Mark Stiving and my mission is to help your company win more business at higher prices, and helping us do that today is our guest, Vikas Pal Boaddh.

Here are three things you’d want to learn about Vikas before we start. He was the Senior Strategic Marketing and Pricing Leader at Honeywell – in fact, he still is. He started out as a Software Engineer, and then he got an MBA and switched careers. A lot like me. I was an Engineer and hated it, so I switched careers. And he still reads a lot of comics that he says when he’s reading them to his kids, the ones that he grew up with, it’s like putting his kids in a time capsule.

So, welcome, Vikas.

Vikas Pal Boaddh

Thanks a lot, Mark. Thanks for the introduction. I hope this will be a good conversation. I’m looking forward to it.

Mark Stiving

That will be fun.

So, tell us. How did you get into pricing?

Vikas Pal Boaddh

I will say, by an accident. I did my MBA in Marketing and General Management, but I was very interested in supply chain, in those kinds of roles. But after my startup – which was in Food Tech – and we couldn’t kind of move it after one year, I got this role which I had to take as my startup was not working. So, it was an accident, but it was a happy accident. I’m very happy to be introduced to pricing for Honeywell and have been working for it for more than 10 years.

Mark Stiving

Nice. I think most entrepreneurs have one of those unhappy experiences where we have to go do something else for a while, and then maybe someday, we can get back to it, so there’s nothing at all wrong with that.

So, tell us about… I always ask people, what are you passionate about? And you wrote quite a few things which I love. But I want to know, what do you think about cost-plus? I’m not a fan of cost-plus; everybody knows that, but you’re passionate about the cost-plus model. Tell me why.

Vikas Pal Boaddh

Yeah. So, cost-plus model is something which we all are born with. I find that that is a default mode of thinking for most of the human beings, and I think that’s default mode because it’s easy. For pricing, there are few things that we need to know. And we all think that we know the cost, because we do for the product or offering that we are selling and we also know how much money we want to make. We put those two things together and cost-plus is generated. But a third thing – how much the customer was willing to pay – is a little hard work, to understand, to ask questions, to probe customers. And that’s why that’s little not so intuitive for human beings. So I guess cost-plus is very easy and cost-plus comes naturally. And it’s a task for coach, like you, to educate people that value plus is the right thing to do.

Mark Stiving

Okay, so good. We didn’t disagree and that makes me happy. But I actually like your description and the fact that cost-plus is easy, but I’m sure you would have gone on to say this if we asked, but cost-plus is not profit maximizing by any means. And if – you know, we always see the 1% windfall – if we could improve our pricing by 1%, that could improve profitability by maybe 10%, somewhere in that ballpark. And so, just small improvements in pricing can have a huge profitability impact which says value-based pricing makes so much more sense than cost-plus pricing. So, what are the hints that you would give or that you’ve seen so far that make value-based pricing easier for people to adopt?

Vikas Pal Boaddh

I guess the easiest thing or the most important thing for people to think about value-based pricing is, I will say, there’s two things. First is to know the customers inside out, to understand your customer base. That is the key thing that one should have. And then value-based will give – as you said – the most profit, most profitable strategy is to have the value-based pricing. So a person or business needs to focus on these two things. Do I want to make expected gains? Which thinking of cost-plus, we know how much cost and the plus something that will be expected gain, but it will not give you the maximum gain. And do you know your customers well? If someone doesn’t know, then they will find it difficult to implement value-based. These two things, I guess, tell us why it is important.

Mark Stiving

Yeah. And so how do you do that where you guys are? You know, you don’t have to give away any secrets, but how do you learn about the customer and what would you describe when you say this is what a customer thinks? What’s important about what they think?

Vikas Pal Boaddh

So actually, I’ll just share without going into detail. We focus on two things. One is, what is my customer selling? How are they making money? So once they understand this thing, that how much customer is selling it to their customers, that tells me that this isn’t the key of what is most important about them, but the most important to them. Because if my offering is helping them sell more, sell better, sell much better offering to the customers, they will be willing to pay more. Understand the customer’s business model and how they’re selling to their end customers too. Second, how do I know about it? It’s simple – asking the customer. Doing VOCs is the most important thing in the pricers. It’s the pricing person’s job to talk to the customers. Ask them about all the things which goes in their business, understand them, model them, dollarize them, and then set the price.

Mark Stiving

Yeah. I think that makes a lot of sense. The concept being if we’re going to sell to B2B, so we’re going sell to other businesses, the only reason another business is going to buy a product from us is because we somehow make them more money, right? We either reduce their costs or we increase their revenue and their profitability. So if we understand their business and we can put our product in their business in a mental state, in a future state, then hopefully, we can help them understand how much money they’re going to make because they bought our product, right? So, that makes all the sense in the world to me in terms of how we understand our customers.

Now, you said pricing people should do this. In your organization, do pricing people actually do this?

Vikas Pal Boaddh

Yeah. We talk to the customers. There are two levels of information, right? One can get all the competitive or price related data that one can gather from internet, right? They can research from consultant reports and all kinds of things that are available to do the analysis. But nothing competes – nothing comes close to talking directly to the customer. So yes, we do that. I’m a pricing person. I talk to the customer.

Mark Stiving

Well, I have to say that I agree with your comment that says nothing comes close to talking to the customers, right? We have to go talk to our customers. I guess my slight pushback was, in a lot of companies, pricing people are involved in so many different products that there’s really no way for us to truly understand the value of our products. And instead, I think our role is often, how do we help coach marketing people or product managers so that they’re out talking to customers and they truly understand the value from the customer perspective? And so I could almost see that as a more important role than us, as pricing people, talking to customers. Does that resonate with you?

Vikas Pal Boaddh

I won’t disagree, and the reason is because I am pricing and I’m also strategic marketing. I handle both the roles, so probably, that’s why I have the added benefit of talking to the customers which helps in the pricing job.

Mark Stiving

Yeah. So I guess that makes a ton of sense. If you’re going to be in strategic marketing, you have to go talk to customers, right? That’s actually a really interesting question. How does strategic marketing and pricing fit together? Because I’m often asked the question, where should pricing sit in an organization? And you’ve been given both of those roles.

Vikas Pal Boaddh

Yeah. So actually, you’re saying a really interesting point, because pricing is not only a reactive activity. It’s not a reaction that one has something to sell, there’s someone to buy, so let’s think about price. Price also helps guide the strategy, that as a strategic marketing, when I see a new market segment, how my price can help me enter that segment, right? Or I’m offering new products, new kind of service, to the same customers. How price can help me increase my business? The price is very, very strong signal. It can signal a lot of things to the customer. And we can really play around it. It can tell to the customer, “Yeah, you should go for the new product because the next best alternative is not so good,” or it can promote next question because the tentative it is too high. As a strategic marketing, whatever study you make, price is a strong lever to implement those strategies.

Mark Stiving

Yeah. I think that makes a lot of sense where you have some control over what the pricing is going to be. Do you actually set the prices for your products?

Vikas Pal Boaddh

Yeah.

Mark Stiving

So you are the person setting and choosing the prices that go out, and you’re choosing the strategy for the marketplace. And in a lot of ways, that’s really nice because you have to be watching the market all the time. You have to be seeing what’s changing. Are competitors changing? Are customer preferences changing? And so that makes a lot of sense for you to be the person saying, “This is the pricing that we want to use.” The thing that I sometimes push back on with that is, I would like it if product managers actually set prices, and the reason I say that is they’re the ones trying to define what the next version of the product looks like. I want them to be responsible for is that product profitable or not? Is it successful or not? So, what are your thoughts on that?

Vikas Pal Boaddh

Great. Actually, yeah. So let me clarify. So when I say I set the price, I mean, as a pricing person, I have a key say in what the price should be, but I just said, the people who own the product – for example, operating managers – they are the people who are kind of holding the price for that. So you’re right that they should be doing a final sign off on that. As a pricing person, it’s my role to provide all kinds of inputs and guidance to help them reach there. Yeah, I agree with your comment.

Mark Stiving

Yeah, that makes a ton of sense then.

So, one of the other things you said you were passionate about was pricing frameworks for an organization. What do you mean when you said those words?

Vikas Pal Boaddh

Right. So after my 10+ years of experience, I use in any organization, there are mainly four activities from the pricing perspective. So, one is setting the price itself. Which has to be more scientific based on value-based pricing, identifying elements, economic analysis, and all that. Well, the key thing for an organization to do is the first pillar.

Advertisement

If you’re in a subscription or recurring revenue business, then you will enjoy and probably learn from my latest book “Win Keep Grow: How to Price and Package to Accelerate Your Subscription Business”. Several people who’ve been in subscriptions for a long time have said to me they love the simplicity of the frameworks. They learned lessons they could go implement immediately in their current businesses. If you’re not an expert in subscriptions, like I wasn’t before researching this book, you’ll learn how managing a subscription product is different from a traditional product. You’ll likely have many aha moments as did I while writing it. It is sure to give you valuable insights as you transition to or add subscription products. Please purchase and read “Win Keep Grow” wherever fine books are sold.

Vikas Pal Boaddh

So, second pillar is about execution. So all the great price, we said we identify all the value elements, we dollarized, we set up a great price, but if our sales folks are not able to execute in the market, if that gets leaked through discounts or any kind of rebates or things, then all that effort goes in vain. So the second pillar of pricing organization is how to ensure that there is no leakage. So, all kinds of analysis, whether it’s waterfall analysis, transactional analysis, discount analysis, that is second pillar. How do we execute the price established?

Third pillar is about price impact measurement. So, all organizations now, they have to report how much they report and how much price impact has been made, how you’re dealing with inflation, how you’re getting price for the value that you’re selling. So, assessing the impact of price change and then delivering it live to your senior leadership is the third pillar.

And fourth pillar is, that first three pillars dealt with how we give a good pricing to the organization. Fourth pillar is driving efficiency in the process. Fourth pillar is about automation in doing all the first three pillars routinely regularly with as less manual intervention as possible so that those things go smoothly. The fourth pillar, I will say, is the automation of all of those three.

Mark Stiving

Yeah. So, I love the way that you’ve broken that down. That’s really nice. Setting prices seems obvious, right? Everybody would do that.

In the execution side, do you deal a lot with salespeople and training salespeople, helping them be more successful?

Vikas Pal Boaddh

Exactly. So that is about execution, that we need to do value selling training, telling them about why they need to be value sellers and not have price as the first chip that they give to the customer, right? So, induce a lot of change management. Is that changing the mentality of the sales folks from cost-plus to value sellers? So, yeah.

Mark Stiving

Yeah. The one that I like that you mentioned is measurements, measuring the impact of what we’ve done. I always find that interesting because I think we, as pricing people, have this huge impact and we can demonstrate that with measurements and numbers that have moved. But then as soon as we do that, somebody in marketing says, “No, that’s because we had this great marketing program this year.” So since you’re both in marketing and sales, you can understand that really well. How do you combat that? How do you make sure pricing gets the credit?

Vikas Pal Boaddh

So once the improvement is done, there’s huge competition within an organization that who gets the credit. And as you said, everyone wants to take the credit of, okay, seller saying, “I did the better negotiation to get the price.” Marketer would say, “I did better promotion, better conferences to get the price.” And of course, as a pricer, I would like to get the credit as well. So, yeah.

I guess, what I say when I say price impact measurement is that for the organization, if last year we sold x and due to price changes we are able to get, again, as an organization, we are able to get extra dollars. That’s the impact to the organization. I’m not talking about volume increase because I guess volume increases more about sales guys doing it, but if it is a percentage points improving the price, that should go to the price folks, pricing folks. Yeah.

Mark Stiving

Yeah. And I also like the attitude that says, “Look, business is a team sport. Maybe I can’t do it on my own, so let’s share it, but we’re getting ASPs up or we’re getting margins up or whatever it is that we’re trying to move. As a company, we’re moving it so that’s what we want.” So, nice.

What are some of the things that you do on the efficiency side? There are some pricing systems companies out there that tout the fact that ‘speed to quote’ is a really important thing. And so, this is on efficiency, how fast can I get a quote turned out when a customer gives me a request. What are some of the things that you focus on when you try to get more efficient?

Vikas Pal Boaddh

Okay. So, for us, we are a very lean organization, and I guess most of the organizations want to be lean and most of the organizations want the things, want more processes and less individual dependent. So when I say efficiency, basically, we try to establish systems so that okay, they have many folks like operating managers, pricers, marketers involved in this thing, but there has to be process. The inputs have to be captured, four different levers to set the price, and those inputs need to be processed, not manually. Again, it should not be that.

For example, let me take an example that previously, a seller would say that, “Three years back, I sold my product at certain sets of price. So after three years, inflation got a little bit. Let me increase the price by such and such percent and then I sell it.” Okay. So, that is cost-plus and that is not efficient. Person is taking responsibility of everything. There is no system.

Again, next step is as a pricer, I would come and say, “Yeah, okay, let’s identify the value elements and do X Y Z and establish the price,” and then, done. But then next time, if I change, the next person comes, he would use his own assumptions for dollarization and value elements and he’ll do that differently. So, now that efficiency in standardization comes to capture all the things that I’ve done into the system and then doing it repeatedly so that processes are set and as an organization, we are not spending that much time doing the same things again and again. Establishing prices one-time process but then revising it every year based on different inputs can be less intensive. It can be automated reasonably with available software and as well as within the company.

So, that is the automation that we finish so that every year, we do not spend time in doing the value work for every product.

Mark Stiving

That was a great example. We could step away from pricing; it doesn’t matter. How many times do we revisit a decision because we don’t remember how we made the decision in the first place? And so if year after year, we’re going to make a pricing adjustment, wouldn’t it be great if we had at least documented how we made the last pricing decision and start from that point?

Vikas Pal Boaddh

Yeah.

Mark Stiving

So, that makes just a ton of sense. All right. Because we’re going to run out of time here in just a second, let me ask you the final question. What’s the one piece of pricing advice you’d give our listeners that you think could have a big impact on their business?

Vikas Pal Boaddh

Okay. So, my advice to work prices would be, keep yourself away from engineering. Keep yourself away from sellers. When you have an opportunity to price something, first, go and try to talk to the customers. If you go to engineering or production side, you would get the cost. It will bias you. If you go to the sales of that team, they will say, “Okay, it’s good margin. It’s bad margin.” But again, thinking about margins is, again, cost-plus. So, just sit in the customer’s mind and think from there – what benefit they’re going to get from that product – and then price from there.

Mark Stiving

I absolutely love that answer. Essentially, you said, let’s go listen to our customers, right? Let’s go talk to our customers and find out what they think value is, and that’s really what’s key. Vikas, thank you so much for your time today. If anybody wants to contact you, how can they do that?

Vikas Pal Boaddh

I am on Twitter. I am on LinkedIn. I’m on email. I go by Vikas0903@gmail.com. You can find me on LinkedIn as well. I can provide you the link under the podcast. And then, you can reach out.

Mark Stiving

Perfect. Thank you. And I wanted to give you a quick compliment on something. It’s something I do all the time, and I love the fact that you do this. I asked you a question and you paused to think of the answer before you start talking, and I really like that. I don’t think enough people do that, so good job. I appreciate it.

And episode 155 is all done. Thank you for listening. 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 in general, feel free to email me – mark@impactpricing.com.

Now, go make an impact.

Related Podcasts