Impact Pricing Podcast

Ep170: How to Incorporate Customer Experience into B2B Pricing with DeAnn Hammer

 

DeAnn Hammer is the Global Pricing Operations Manager at 3M, an industrial machinery manufacturing company that innovates with purpose and uses science every day to create real impact in every life around the world. She was originally a Marketing Manager in 3M. DeAnn was the valedictorian of her high school senior graduating class

In this episode, DeAnn shares how she does the work of simplifying prices in a way that your customer understands as she puts emphasis on having not to negotiate once it’s properly done.

Why you have to check out today’s podcast:

  • Find out why it’s a game-changer move for you to make buying a B2C experience for clients in a world of B2B
  • Discover how simplifying pricing removes the need for negotiating prices in the market
  • Understand how price simplification unwinds the complexity in pricing

             

“If you make customers wait, you’re going to lose the sale. Process and simplicity are going to allow you to grow your business even on really mature products.” 

DeAnn Hammer

           

Topics Covered:

01:53 – How DeAnn got into pricing; DeAnn as a market development manager

03:07 – Marketers overpricing and underpricing their products

06:34 – The difference between the roles of a pricing manager and a pricing operations manager

08:09 – Activating pricing and making it a B2C experience in a B2B world

12:36 – Houses and cars as the only things consumers negotiate for

15:15 – Unwinding the complexity in pricing through price simplification

21:00 – Determining what’s wrong with Mark’s strategy

23:34 – Having to make tradeoffs by trying to get rid of negotiated deals

25:32 – DeAnn’s piece of pricing advice for today’s listeners

         

Key Takeaways: 

“You do a lot of insights work in marketing and you’re gathering that information about customers’ willingness to pay, but there’s also really bad questioning and marketing insights. What people tell you during insights isn’t always what they mean, so you really need to pay attention to that willingness to pay and the value the product gives.” – DeAnn Hammer

“Activating pricing and making it a B2C experience in a B2B world; I actually think that’s how we can grow.” – DeAnn Hammer

“I really think businesses have to start thinking about things that are easy, things that people understand, things that they have the data for, how can they just buy those, versus those things that are really perceived as having a much higher value in the idea that it should be negotiated. I think there’s a line there about what should be negotiated and what shouldn’t be.” – DeAnn Hammer

“There was a time where you had to walk into a bank. There was a time you had to wait for an answer. And that’s no longer the culture that we live in; we want that instant gratification.” – DeAnn Hammer

“Keep it simple. Get the price out there. Let them buy it.” – DeAnn Hammer

 

People / Resources Mentioned:

Connect with DeAnn Hammer:

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.)

DeAnn Hammer

If you make customers wait, you’re going to lose the sale. Process and simplicity are going to allow you to grow your business even on really mature products.

[Intro]

Mark Stiving

Today’s podcast is sponsored by Jennings Executive Search. I had a great conversation with Jon Jennings about the skills needed in different pricing roles. He and I think a lot alike.

If you’re looking for a new pricing role or if you’re trying to hire just the right pricing person, I strongly suggest you reach out to Jennings Executive Search. They specialize in placing pricing people. Say that three times fast.

Mark Stiving

Welcome to Impact Pricing, a podcast where we discuss pricing, value, and the simple relationship between them. I’m Mark Stiving, and our guest today is DeAnn Hammer. Here are three things you’d want to learn about DeAnn before we start.

She is the Global Pricing Operations Manager at 3M. She was originally a Marketing Manager and did a stint in market development, which I think of as long-term strategic sales. Oh, and the best thing about her is she was the valedictorian of her high school senior graduating class. She was number one out of nine people.

Welcome, DeAnn.

DeAnn Hammer

Hey, Mark. How are you today?

Mark Stiving

I’m doing fabulous. How are you?

DeAnn Hammer

I’m great.

Mark Stiving

I’m not sure one out of nine is a great thing, but it’s better than being two out of nine, right?

DeAnn Hammer

Right, and you certainly don’t want to be nine out of nine; that’s always a letdown, really.

Mark Stiving

Exactly.

Okay. How did you get into pricing?

DeAnn Hammer

I’m one of those people, again – accidental pricer – where you reach a certain point in your career, and then your company is looking for somebody that has maybe that journey as a portfolio marketer or market development manager, and they say, “Hey, we need a pricer.” And that’s how I landed up in this role.

Mark Stiving

Okay. Well first, I actually want to go through your career just a little bit. I did say I thought of market development as long-term strategic sales. Is that really what it was? Is that what you were thinking?

DeAnn Hammer

It maybe wasn’t what I was thinking at the time, because when you’re publicly traded, it’s how are we going to end up for the quarter, but really, also trying to build portfolio plans to take maybe mature market and extend it, or being handed a new product and trying to grow that into a viable portfolio for the company.

Mark Stiving

Yeah. So, you’re taking whatever the situation it is that you’re given, and trying to say, how do I find new opportunities around this, something that other people haven’t thought of yet?

DeAnn Hammer

Correct.

Mark Stiving

And so, putting it in pricing terms, you’re actually looking for value.

DeAnn Hammer

Correct.

Mark Stiving

Who’s going to hear value from our products?

DeAnn Hammer

Right. That is absolutely correct.

Mark Stiving

Nice. And then you said you did a stint, or you’ve actually done a lot of work as marketing manager. How much did pricing matter to you when you were a marketing manager?

DeAnn Hammer

It mattered a lot, because I think, you do a lot of insights work in marketing and you’re gathering that information about customers’ willingness to pay, but there’s also really bad questioning and marketing insights. And I always say, it’s like asking a mother if she wants to feed her child fruits and vegetables. She will always say yes, because if she does say no, then she’s a bad mother. When we do that marketing research with pricing, you get the same thing, where they’re like, “Oh, yes, I’m willing to pay $10.” You launch the product and sales are sad; it’s not going so well.

So really, what people tell you during insights isn’t always what they mean, so you really need to pay attention to that willingness to pay and the value the product gives. If you don’t have a wow factor, it’s not changing their whole process or protocol and you’re bringing a tremendous amount of value. A lot of marketers overprice their product at go live or at product launch.

So, I mean, that’s what I learned, as I know they said this, but I don’t actually think they meant what they said.

Mark Stiving

That’s actually funny, because I actually think a lot of marketers underprice their product at go launch, or a lot of companies do. And maybe the difference is when we first launch a product, we don’t know how to communicate the value of the product yet.

DeAnn Hammer

That can be true. And I think, maybe in my experience, I’ve had a lot of what I’m going to call line extensions or bolt-ons, and there’s always this understanding that if it’s new and improved, there may be a higher value. But I think about other companies like Microsoft that do that self-replacement strategy, right? Like, “We’re going to launch a new software”, “We’re going to make enhancements,” their pricing doesn’t always mean it’s doubled because now it has these enhancements; it means I’m defending my market share and I need to keep my base and then expand it into new spaces. I think that’s a really hard concept for marketers to follow.

Mark Stiving

Yes. And as I think about it, I actually think it probably makes a huge difference on if you have a big brand name company like 3M or if you’re in a startup company. I think big brand companies have more confidence, and so they might be more willing to overprice just because they think their brand is – and I’m not saying it’s not – but they think their brand is so valuable; of course, we’re going to get three times the market price or whatever it happens to be.

DeAnn Hammer

Yeah, that can be true. There is that ego or that competence around who you are and what you can price products at. And it’s also, when you do that analysis around gross margin, you’ve made a big investment in R&D, perhaps, so you’re trying to recap that and get that return on investment as fast as you can. So why not see what the market is willing to pay? Some marketers use it as a market test as well, right? Like, well, we could only penetrate 10% at this price, but we captured 10%. Now, how do I go get another 20- 30% of the market? Maybe I have to lower my price and go after a different segment.

Mark Stiving

Don’t we call that a skimming strategy?

DeAnn Hammer

Yes, we do. That is definitely skimming.

Mark Stiving

Okay. So, your title is a Pricing Operations Manager. What is the difference between a Pricing Manager and a Pricing Operations Manager?

DeAnn Hammer

So, I say their strategy, and then there’s operations.

So, what we’ve been told, and what I actually hear from a lot of my friends in the pricing community, is customers tell you it’s hard to do business with you, and the translation is, when I place a purchase order with your company, do I have the right data? Do I have the right price? Do I have the right unit of measure? And in many times, it doesn’t necessarily work. Our channel partners have a hard time consuming all of our data, and they don’t find it easy to place a purchase order against a lot of what I’m going to call industrial companies. And so that’s their comment, right? That it’s hard to do business with you.

So, my job in operations is to change that message from our customers to say, “Oh my gosh. It’s so easy to do business with you, and I understand exactly what the price is to submit my purchase order, and it’s so easy, I’m going to give you more business.” So, that’s the operations side of what my current role is versus what I’m going to call pricing strategy, which is, what is the value for the product? What are people willing to pay? What segments of the market are we going after? We have different people working in that type of area that work with our business teams. I’m trying to make business and transactional pricing better for my company.

Mark Stiving

So, can I say I absolutely love what you just said? I don’t often think of that when I think of pricing. I often think, when I think of operational, I think of oh, I’ve got a deal desk and I’ve got to get the right price to the right customer at the right time. But this whole concept of how do we make the pricing, the quoting, the invoicing that comes after that really simple for our customers?

DeAnn Hammer

Well, and I think what’s happening now is that because of the last two years have a lot of people at home, a lot of people ordering things online, they want a B2C experience no matter where they’re shopping, right? So, we get nine in a B2B world, and we haven’t caught up yet. So, they want to be able to search for your product, they want to be able to put that product in the shopping cart, they want to clearly understand what are my pricing options? “If I buy a case, it’s x; if I buy 10 cases, it’s y. I’m going to choose, I’m going to buy it, and it’s easy.” So, they’re looking for 24/7 pricing, and they’re also looking for you to offer price points that makes sense to them so they can make a margin. When they have to call someone, when they have to make an inquiry, it’s no longer easy, so they’re less likely to want to order more things from you because it’s just so darn hard.

So, I’m calling it like activating pricing and making it a B2C experience in a B2B world; I actually think that’s how we can grow.

Mark Stiving

I think that’s a pretty interesting concept too. So, when you think about the way we buy anything, right? We go to Amazon, we say “Hey, I want this,” throw it in the shopping cart, or go to Target or Walmart’s website, doesn’t matter, whoever’s website, and they just ship it to me after I pay them with my credit card.

Now, what I love about that, from your perspective, is if we do this in the B2B world, I don’t have anybody negotiating with me.

DeAnn Hammer

Correct. And that’s what I think about, right? I’m like, when you go to Target and you grab a pack of gum at the checkout, are you negotiating with the cashier? No. And in many cases now, at a lot of our retailers, you can do the self checkout or you can drive in, they’ll put it in your car. People want that. And in our market research, they’ve said, “We love your standard pricing.” And for me, standard pricing is it’s published, it’s in a price file, if you’re an authorized channel partner, you can see pricing. Where they say that industrial type of companies fall is that negotiated pricing, because it takes time. We don’t have a good strategy. Even if they get an answer quickly, it takes too long to get it into your system so they can see it. So now, the purchasing agent has to wait.

So, whoever can get this done faster is going to win more business, because they’re expecting it. They want it.

Mark Stiving

Yeah. So, there are systems out there that could help us negotiate automatically, right? So, offer discounts and get things out. But the thing I love about what you said about making the B2B a B2C experience is that I think if we did that well, we could set it up so that nobody ever asks to negotiate, because all of a sudden, it becomes a hassle, right? It’s so easy for me to not negotiate. I would much rather save the time and pay you the extra penny, or whatever it is per unit.

DeAnn Hammer

Right. And I think you have to evaluate as a company, right? Like, what deserves negotiation? Certainly, there are things that aren’t simple, and maybe that takes a little bit more work, it’s more complex, but for products that have been on the market, for products that people order every day, they know exactly what they want, they know exactly how that’s going to work with their application. I really think businesses have to start thinking about things that are easy, things that people understand, things that they have the data for, how can they just buy those, like you said, like Amazon, put it in my shopping cart, it comes, it’s amazing, versus those things that are really perceived as having a much higher value in the idea that it should be negotiated. And I think there’s a line there about what should be negotiated and what shouldn’t be.

Mark Stiving

Yeah. So, in our world as a consumer, I think the only two things we negotiate for are houses and cars.

DeAnn Hammer

And I think much less so cars, because I mean, you see a lot of the car companies, right? You don’t have to go to a dealer. You can buy your car online, right? You can look up pricing in Kelley Blue Book, right? You can do all of those things, as a consumer, to say buy now. And I don’t know how disruptive that’s going to be, like Carvana or some of those companies, but it’s interesting to me because I despise buying cars, because it’s an all-day thing. I’m going to be there all day, and then yeah, we’re going to talk about trade and value, we’re going to talk about purchase price value, and it’s just too much work, and I just don’t enjoy it.

Mark Stiving

Okay. So, what I want all of our listeners to do at this moment, because we just, I don’t know if you came on here saying this is the message I want to give, but this is such a powerful message. And that is, if we can simplify the buying process, there will be a lot of people out there, who used to negotiate, who won’t negotiate just because it’s simpler to buy, right?

DeAnn Hammer

Correct.

Mark Stiving

And so, that’s the story you just told on the cars, because we used to always spend all-day in the dealership, negotiating a price, and nowadays, you can just buy it online and have the car delivered to you if you want, and it’s done.

DeAnn Hammer

It’s done. And I love that. So yeah, exactly. And if you have a great experience and that car shows up and it’s exactly what you wanted, then why not try it again?

So, I really think people need to be careful about thinking because it’s a larger ticket item doesn’t need to be negotiated. Housing still may be a little different. The market’s crazy right now. Pricing is going over the top. But again, that waiting period on housing, if somebody could figure that out, maybe that would be a different experience as well.

But I think we are– and I’m dating myself, because there was a time where you had to walk into a bank. There was a time you had to wait for an answer. And that’s no longer the culture that we live in; we want that instant gratification.

Mark Stiving

There was even a time where we had to use a rotary phone.

DeAnn Hammer

Correct. And you had to have that line that you would drag into the other room so your parents couldn’t hear you talking about what you were discussing with your bestie from school, right?

Mark Stiving

Absolutely.

DeAnn Hammer

Yeah. So now, it’s just that culture of I want to have an answer now. And if you can’t, it’s just too hard.

Mark Stiving

Okay. So, if I were going to start a new e-commerce company today, there’s about a million different shopping cart companies that I could go to, to solve this problem for me.

DeAnn Hammer

Right.

Mark Stiving

Do you guys have to build it yourself or there are out there B2B type commerce sites that you can just adopt?

DeAnn Hammer

Okay. So warning, there are. You could get a piece of software, and it could do a lot of good things for you, but if you have 120 years of pricing, which I do, then you just can’t turn on that e-commerce site, and it looks beautiful, and I’d know exactly what it is, because we’ve actually built complexity into the pricing that the pricing strategy team or the business team might have created. So now, you have to unwind that complexity. If I have 52 price points for the same item, why do I have all those? Which one am I going to put in my software?

So, a lot of what my teams do, as well, is what we call price simplification. So, we kind of go after product families, where our marketers have created a lot of things for our channel partners to engage in, and then we try to say, “what’s really the best price for the best value that you want to bring in?” and say, “if you just buy at this price, you can buy every day.” It’s not as easy because the balancing act is that financial outcome. I can make it really simple and drop that price, but then I’m going to lose a lot of money on my P&L. So, I can’t be too aggressive at the same time because I’ve got so much complexity. It might be a two or three step process to get to the end game. So, working on those projects to take out things like volume bias. Do channel partners really want to buy a semi load of pencils? Maybe not. So, we’ve thought of all of these reasons to discount on price, but when you see who participates at what price, why do people do that, why don’t they, a lot of business teams don’t have the time to really analyze how people are buying. They’re always looking towards the growth opportunity, but they’re never looking at what they’ve done.

So, I always say like I’m the closet cleaner. We got to take everything out of this closet. we’re going to go through it all, and like 95% of it we can’t put back, and when we put it back, it has to be appealing to the person that’s trying to make more margin on it – the channel partner – and also the business. Like, what’s going to happen to your margins and how you manage that portfolio going forward? So, I always say like, you can buy software, but if you don’t change what you’ve done, and I always say it’s a lift and shift. Do not lift and shift and drop it in; disaster. So, you got to take a little bit of time and redo what you’ve done, what you’ve created.

Mark Stiving

Nice. Okay, so I’m going to say what you just told us, I always teach the exact opposite.

DeAnn Hammer

Okay.

Mark Stiving

No, that not to say that you’re wrong by any means, but I teach companies about price segmentation and how we define different customers with different willingness to pay. And what I always say to them, because you’re just like the perfect example, what I always say is, you can make it too complicated, right? You can go add one more segment, and you’re probably going to make more profit. If you do 10 more segments, you’re probably going to confuse everybody and everything. And so, there’s this real balance between how do we choose how many prices to have out there? How do we keep it simple for us internally and for our customers externally? So, I think that’s just really fascinating, because you with 120 years of experience, you found yourself on the other side of the story.

DeAnn Hammer

Right. And by the way, I do agree with what you’re teaching, because when you really sit down and say how many segments do I really have? I don’t think you have 57 in the same market; maybe 10 would be a lot, but somehow you end up there. But again, it’s not always easy to look back and say what’s really meaningful and what’s important and then what is the value by each segment. It’s really hard, I think, for business teams to look at that, make that analysis, and then make choices. It’s far more comfortable to just bring it all over and expect the best. It doesn’t work that way for the purchasing agents from the company because remember, in a B2B business, you can have the same channel partner serving all segments.

Mark Stiving

Yep.

DeAnn Hammer

So that means for them, they have to figure out how to load their ERP system with all that data and remember when to use it. And I would tell you, as you advance your software, as a company, a lot of the traditional industrial distributors, channel partners, maybe even converters, they’re not. Like, it’s a huge investment to add in new software. So, I’ve just advanced my software, and now, they can’t keep up. So, if I’m expecting them to still have a good experience with my company, I need to know how their software works and 57 price points does not work. They’ve had to hire two to three more people to manage my data. That’s not going well. So, I have to simplify to maybe downsize their capability.

Mark Stiving

Okay. So DeAnn, here’s my strategy. I’m in your shoes, I’m about to run your business for you, and here’s my strategy for what I would be doing. I would be taking a look at all of my channel prices; I would pick the highest one and say that’s my channel price. And if you want to buy in my simple B2C format, this is my channel price. You want to negotiate with me? Okay, let’s have a conversation. We’ll figure it out. But here’s the easy one.

So, what’s wrong with my strategy?

DeAnn Hammer

So, what’s wrong with your strategy is you’re going to negotiate your way into a ton of deviated pricing. So now, in fact, you’re asking your channel partner to negotiate every single time because they know, oh, that’s just your published price, but that’s not really what I can get. And it’s probably not the best market value, so where do you want your salespeople to spend their time?

Mark Stiving

By the way, I don’t disagree with you at all.

DeAnn Hammer

Yeah?

Mark Stiving

I love these conversations.

How is that different than buying a car? So, I know if I go into the car dealership, I’m going to get a better price than Carvana.

DeAnn Hammer

Do you know then?

Mark Stiving

I do.

DeAnn Hammer

I mean, I don’t know.

Mark Stiving

I know that.

DeAnn Hammer

You know that. Well, I think I have to ask myself, again, which product are we talking about, right? Like what’s worth the negotiation?

So, if the product is a new product, it’s a game changer. It’s a product I want to get more market share of. I want to work with customers to enable this new technology. Maybe that’s worth it. Maybe I’d do publish that price point. Again, if it’s a pencil, I don’t really want to use sales productivity time to negotiate a product that everyone knows how to use, everyone can quickly do a search on the internet and find a competitive pricing. Not going to pay $10 for a pencil. So, be very picky about that strategy.

And by the way, there’s product lines that have both strategies. Half the portfolio is very easy. It’s been out there while we know how to use it. This other new part of the portfolio is very different and is worth having those conversations for, and selling value and see if we can sell up, right? But I feel like one of the biggest productivity losses is negotiating on products that don’t maybe deserve the time to renegotiate. I’m not saying they’re bad. I’m just saying like, we should sell them and grow them and penetrate at a price that we can grow that business without extensive sales time.

Mark Stiving

Let me try to push back one more time, and it isn’t because I think I’m right, by any means. I’m trying to get to the underlying concept that really matters here.

And so today, with 57 different prices, you already have salespeople negotiating all these prices. And so, if we offer a B2C buying experience with a relatively higher price, we’re at least getting rid of some of those negotiated deals, not all of them.

DeAnn Hammer

Sure.

Mark Stiving

Right? And so, it’s can we move that direction a) to make it easier for a customer, and b) for us to make more money?

Now, if you’re trying to get rid of all the negotiated deals or 90% or 80% or whatever the number is, then we are going to end up making a trade off on how do I get a lower price out there? I realized I’m going to sell it to this customer for less than they’re paying today. But there are these tradeoffs we have to make. Did that one makes sense or no?

DeAnn Hammer

Yeah. And I think the tradeoff is volume, right? So, it’s what’s the financial relevance of what you’ve just done, right? If I picked a really high price point on a product that I’ve just taken away all their margin, if they can easily go get that from another competitor for a different negotiated price, and it’s worth it because for that channel partner, it’s a multimillion dollar spend, it’s probably worth it for them to go back and negotiate with another supplier. If it’s a small effect for that particular channel partner, it’s not a big portfolio for them, you’re right; they’ll probably just buy it at that higher price and be happy. So, balancing that out. I always say like, what’s financially relevant? There are some things you can pick and go higher and go, “That’s fine. I’m not worried about it.” Other things, you can create a swirl, and actually create a lot more work, because you’ve chosen something that isn’t workable in the marketplace. That’s what I call like every day best pricing that people accept.

Mark Stiving

Nice.

DeAnn, this is just so much fun. I could do this for another hour or two, but we’re going to have to wrap this up. Last question for you: what’s one piece of pricing advice that you would give our listeners that you think could have a big impact on their business?

DeAnn Hammer

The biggest thing that I’ve worked on for about the last four years is keeping it simple. I can’t stress enough how difficult it is to have a company put purchase orders against your system and have them, okay. I’m going to use– this is from a customer. They say that doing business with large industrial companies is like watching the Wizard of Oz. “Oh, great marketer, what price will I get today? Who’s standing behind the curtain? And how long is this yellow brick road?”

If you make customers wait, you’re going to lose the sale. So, process and simplicity are going to allow you to grow your business even on really mature products. You can’t do enough of it. That’s my advice.

Mark Stiving

Probably more so on really mature products, if you want to know the truth.

DeAnn Hammer

Really mature products. Keep it simple. Get the price out there. Let them buy it.

Mark Stiving

Yeah. So, my favorite thing about today’s conversation that we had was I had never before thought about putting a B2C experience in a B2B sales situation. And no offense. It’s obvious once you say it, right?

DeAnn Hammer

No problem. But a lot of it’s not really thought of very often, right?

Mark Stiving

Yes, absolutely.

So DeAnn, thank you so much. This has just been awesome. If anybody wants to contact you, how can they do that?

DeAnn Hammer

You can find me on LinkedIn, just DeAnn Hammer. I think I’m the only one out there. I’m not a Diane. I am a DeAnn. DeAnn Hammer on LinkedIn.

Mark Stiving

And we’ll probably have your URL in the show notes, so it’ll be easy.

DeAnn Hammer

Great.

Mark Stiving

Alright. Episode 170 is all done. Thank you so much for listening.

If you enjoyed this, would you please leave us a rating and a review? And our goal is to help you win more business at higher prices, so if you have any questions or comments about this podcast or pricing in general, feel free to email me: mark@impactpricing.com.

Now, go make an impact.

Mark Stiving

Thanks again to Jennings Executive Search for sponsoring our podcast. If you’re looking to hire someone in pricing, I suggest you contact someone who knows pricing people. Contact Jennings Executive Search.

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