Ep52: How to Make Sales More Effective with Value-Based Pricing with Kevin Lemke
Kevin Lemke is a commercial executive with a passion for fixing and creating businesses. Strong record of delivering revenue and margin upside. Career-to-date benefits generated are greater than $500M of additional margin – an average of .5% return on sales. His specialties include: organizational Leadership, Innovation Strategy, Turnarounds & Business Transformation, Digital Marketing, B2B Sales, Pricing Strategy, Go-to-market Model Development, Value Proposition Development, Whitespace Identification, Organization structure development, and alignment.
In this episode, Kevin shares with us his expertise in setting up pricing in B2B and B2C businesses.
Why you have to check out today’s podcast:
- What does factors like leadership and influence have to do in pricing your product and service
- Pricing lessons you need to know to understand your business better
- Discover how to organize your pricing leadership function for your business success
“Bring your sales guys into the conversation and have them be part of making sure that we’ve got the price, the right pricing programs, and discipline. I think they need to be part of this. They benefit. We all benefit.”
– Kevin Lemke
Get Accelerate Your Subscription Business: Your Blueprint to Packaging & Pricing for Growth Course
01:08 – What does he do as VP of innovation
01:54 – How did his career in Pricing start
03:05 – How was it like learning the systems and processes already in place at the time he entered the aviation industry
05:20 – Thoughts about “pricing is the sales prevention team”
06:29 – Talking about Leadership in Pricing
07:16 – Describing his stint at Zilliant and where this company is focused at
08:53 – Leading a pricing initiative when he got back to Dell
10:15 – What does internal product management entail
11:01 – Lessons he learned in pricing that helps in understanding business
11:49 – The hard part of doing internal sales
13:27 – Hints on how to be doing internal sales
14:57 – What has contributed to his vast knowledge about pricing
17:37 – What happens when we focus on value
18:24 – What differentiates B2B pricing from B2C pricing
19:47 – One valuable pricing advice he has
“To be successful, to do things right, it’s very much a team effort, you know, and you can imagine, especially in these large fields you’re at in the center of things. So, it’s bringing a team of sales, finance, marketing, operations folks together.” – Kevin Lemke
“To be successful, to do things right, it’s very much a team effort, and you can imagine, especially in these large fields, you’re at in the center of things. So, it’s bringing a team of sales, finance, marketing, operations folks together.” – Kevin Lemke
People/ Resources Mentioned
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Full Interview Transcript
(Note: This transcript was created using Temi, an AI transcription service. Please forgive any transcription or grammatical errors. We probably sounded better in real life.)
Kevin Lemke: Bring your sales guys into the conversation and have them be part of making sure that we’ve got the price, the right pricing programs, and discipline. I think they need to be part of this. They benefit. We all benefit.
Mark Stiving: Welcome to Impact Pricing, the podcast where we discuss pricing, value, and the personal relationship between them. I’m Mark Stiving, and today our guest is Kevin Lemke. Here are three things you want to know about Kevin before we start. First, he is currently the VP of innovation and head of startups at Stanley Black & Decker and I can’t wait to hear what that actually means. He spent many years of his career in pricing including VP of pricing at Stanley Black & Decker and probably my favorite thing, he went to West Point. Welcome, Kevin.
Kevin Lemke: Hi, Mark. Thanks for having me.
Mark Stiving: It’s going to be fun. First off, what does a VP of innovation do?
Kevin Lemke: Well in this case, what we’re doing is trying to find new sources of growth for this hundred and 75-year-old manufacturing company. So, we’re looking outside of the four walls and finding new problems to solve and bringing new businesses to life.
Mark Stiving: I got to say, that sounds like one of the most fun jobs somebody could have.
Kevin Lemke: I appreciate that. I share that sentiment. We’re having a blast here.
Mark Stiving: The reason I want to talk to you is you spent a bunch of time in pricing and I was really curious about how pricing impacted your career, helped your career, et cetera. So, let’s start with this question. How did you get into pricing in the first place?
Kevin Lemke: Yeah, I started my pricing career after grad school, so, I went to the University of Texas and my first job out of grad school was at Continental Airlines where I did revenue management. So, it’s a close cousin to pricing, but it’s a very, as you might imagine, analytically fact-based driven discipline to help the airlines become, be profitable. And we work closely with the pricing folks. I spent a year at Continental Airlines, had a great time there, but then was asked to take that discipline. I was hired over to Dell Computer in Austin to do B2B pricing for them. So, they were looking for discipline from places like the airlines. And so I came over there, managed a portion of their B2B large deal pricing. So, I’d say that was a combination of those two was my start in the pricing world.
Mark Stiving: Both of those sound really fascinating to me. When we talk about Continental Airlines, I assume that when you walked in the door, they already had a bunch of processes and systems and everything and you spent your time learning their systems and processes. Would that be accurate?
Kevin Lemke: When you think about revenue management, if you’re connecting to the business at all, you might think about American Airlines having pioneered that discipline. Continental was there shortly thereafter and took it to a whole new level. So, yes, we had pretty sophisticated pricing software. It wasn’t automatic, so it absolutely needed a lot of analyst interaction. But we had the software, we had the processes. It was, you know, very operational. I had, you know, the East Coast markets, Newark to Orlando, New York to Boston. I had all of these, these markets that I had to manage for optimal profitability. I had all these tools that were great, but actually, they were still in the early days. So, there was an element of continuous improvement and trying to make, you know, take these to the next level, take these tools and processes to the next level.
Mark Stiving: So, I have to say, I think that job sounds fun, but what I really appreciate is the fact that you took this concept that says, I’m learning about how people are willing to pay, how people make decisions. And then you said, I’m going to try to take that and apply it in a completely different field. What was that like?
Kevin Lemke: That was very, very different and so much fun going from a very, you know, data-driven performance metrics-driven environment with I would say no interaction with the customer or the sales teams. There were cases when we made some, maybe the data didn’t support the best decisions and we left some people behind at the gate. We had, you know, there were real impact store decisions, but largely it was you’re in the software, you’re making decisions on a day to day basis in the office, go to Dell and I’m sitting in the middle of all of the sales teams working hand in hand with the sales teams helping put together large deals and the pricing associated with them. So, it was, you know, really in the trenches hand to hand combat. So, yeah, it couldn’t have been more different worlds, but the discipline trying to take this, you know, these performance metrics bring data to the table to make fact-based decisions was something that was desperately needed at Dell at that time where it was a very sales-driven organization.
Mark Stiving: Have you ever heard the phrase, pricing is the sales prevention team?
Kevin Lemke: Yes, I have. We, we were on a journey there. There were times where we were called the sales prevention team, the special pricing team. You know, I really took pride in partnering closely with the sales teams, working to try to build that rapport, build that relationship so that we all realize we’re in this for the same reasons to drive profitable growth. We all had different roles in that, but ultimately we’re trying to achieve the same thing. You know, some of my best, you know, work relationships are still from those days back in the nineties with Dell.
Mark Stiving: That sounds fascinating. When I think of what does it take to be a pricing champion? I always say that there are three components to that. There’s one that is, I have to understand pricing really, really well. I have to understand the data. I don’t have to be able to manipulate data, but I have to understand the data. And then the third one, which I think most people in pricing don’t do well is leadership or influence. And it sounds like either you already had that when you went into Dell or you learned it well in Dell dealing with the sales team.
Kevin Lemke: You framed it up well. I can’t say I’ve put that much thought into it. Absolutely, I see it as that blend of analytical, fact-based decisions with a very, very human element. The experience I got, you know, at the beginning of my career through West Point and the early days of the army where it is all about honing your leadership skills. Yeah. I think it just, it couldn’t help but play, a big part of this, I can’t say, you know, it was easy walking into that environment. It was still an adjustment and learning how to operate, but yeah, I mean it is, it’s about getting everybody rolling in the right direction.
Kevin Lemke: Yeah. That’s always, always challenging to do. And I mean, it’s just, it’s not an easy task when people have different objectives or beliefs to try to get everybody going in the same way. So, excellent! Where did you go after Dell?
Kevin Lemke: So, I went to a startup in Austin called Zilliant. They were in the pricing space. One of the pioneers in the pricing space. They’re thriving today. They’re still going strong. But, yeah, I left Dell to go chase my dotcom dreams at a very interesting time in the dotcom bubble. Fortunately, it wasn’t truly a dotcom, but, I went over there and took on there, you know, product management and business development. So, I was employee number 25 or something like that. And we were trying to get the first rev of the Zilliant solution defined out the door. And I got to play a part in defining that solution and finding the first few customers for Zilliant.
Mark Stiving: I love those pricing systems companies. I think that they add a ton of value to their customers. It’s amazing. And so Zilliant focused mostly on price optimization, is that right?
Kevin Lemke: That’s right. The first, actually the first rev was really price scraping, so getting price information off the web. But the next rev and kind of the cornerstone of the solution at that time was price testing. We had a proprietary way to go and test out different pricing levels and pricing schemes out in the market and rapidly create that demand curve to help inform decisions in almost real-time. So, that was kind of the first kind of step out of the towards pricing optimization.
Mark Stiving: Yeah, I think that’s fun. I think that’s fun. Okay, so where’d you go next?
Kevin Lemke: I actually went back to Dell, so I had a great, two years at Zilliant. We had started getting some traction. I was kind of, I was one of those early employees. We got real product management in place and we started bringing real salespeople on board, people who really know how to sell enterprise software. So, I was doing more pure business development and at that time the partnership angle was not kind of highly active at that time. So, I got contacted by the folks that I’d worked with at Dell and they said they were ramping up a large pricing transformation effort and wanted me to come back and lead it. And I guess a bit of the backdrop is it was a tough decision to leave in the first place. And the people I worked with, I can’t credit enough folks like Chris Mitchell and bill Yule, who encouraged me to stay but supported my decision when I said I wanted to leave to chase the dotcom dream and then said the door’s open. So, two years later they stand up this strategic pricing initiative, this transformation and asked me to come back and lead it. So, I thought it was just another, you know, a great way to come back and build out and build on the experiences I had in the pricing world.
Mark Stiving: So, interesting you say that cause I’m sitting here looking at your LinkedIn page while we talk and what it says is, senior product manager. So, you moved into product management.
Kevin Lemke: I did. So, internal product management. So, out of that pricing transformation work, I decided that you know, the first kind of stage of that was modifying or changing bad behavior, but it was very manual. We had a vision for a pricing system, pricing solution. And so I took on that felt responsible for setting up the vision or at least a portion of it and wanted to see it through. So I joined the organization that would implement that software so that, you know, we called that product management
Mark Stiving: Nice. At this point in your career, so we’re at the Dell second trip. What have you learned about pricing that you think helps you understand business?
Kevin Lemke: To be successful, to do things right, it’s very much a team effort, you know, and you can imagine, especially in these large fields you’re at in the center of things. So, it’s bringing a team of sales, finance, marketing, operations folks together. So, you know, I think it’s almost a Ross form of business. And so you’re really learning in the trenches and what it takes to put together good deals, put together something that is delivering value for your customers. You know, you’re living through the negotiations. You’re understanding what’s working, what’s not. So, it was a really fascinating kind of view. And, it gave me that view into so many different parts of the business.
Mark Stiving: Yeah. At one point in my career, I had the opportunity to implement a pricing system as well. And you know, it’s interesting because it was absolutely understanding how our company is looked at by the marketplace. How do we propose prices to the market? But the harder part of this was selling internally, getting all of the buy-ins to all the, from all the different people that had to be involved.
Kevin Lemke: Well said and I’m actually surprised I neglected that piece. You gotta be a sales guy. I mean this was actually business development to try to get this sold internally. An organization doesn’t just naturally gravitate to taking on multimillion-dollar IT implementations.
Mark Stiving: And then you’re about to go change the way somebody does something and they hate you.
Kevin Lemke: That is, yep, that’s true. That is true. Somebody who’s going to hate you. We were trying to create something that was going to improve our sales people’s lives. I got to say when we’re rolling that out, probably our biggest champions, the IT teams that I was a part of were not, we were trying to do something, we were trying to break some glass, get things done quickly. So, I would say that was probably where the most friction was. But certainly, I mean you can’t go and, and roll something out like this unless you’ve got all the business unit presidents nodding their head and wanting to see this. So, there was a big sales effort.
Mark Stiving: Yeah. Any hints for our listeners on how to go about doing that sales job inside the company?
Kevin Lemke: You know what’s important is not to think about something like that is you know, hey, we’ve got the silver bullet and because I think what you’re going to do, it’s not a silver bullet and it will be disappointing ultimately. And then you’ve got to start with a focus on processes and I think you can pilot process improvements and do that in a manual way and then build the case for how software is going to improve our lives. And you’ve got to get, not just the leadership bought in, but you’ve got to get kind of all levels and all stakeholders. So that lends itself to engagement, you know, projects getting people bought in, and that way you build the case for what can be a big project, but ultimately much bigger impact.
Mark Stiving: I remember the one thing, if anyone were to ask me that question, the one hint I would give is when I did this, I did tons of one on one conversations with people inside the company. I wanted to know what their problems were and how I might be able to help them get better at whatever they were doing. And, and they knew I was looking out for them, even if I couldn’t always listen to them, you know, couldn’t always do what they wanted. They, at least I were just fine.
Kevin Lemke: Yeah, completely agree. You’ve got to get that connection with the teams. It can’t be seen as something that’s being imposed upon folks.
Mark Stiving: Okay. And so instead of going step by step through the rest of the career, let’s jump to where you are today. And ask, did your knowledge of pricing and the things we’ve been through so far, did it help you get here or what was the magic?
Kevin Lemke: Absolutely. So, the beauty of the pricing discipline, it’s so multifaceted, so many elements to it. You know, we’re taught or working with so many different stakeholders and we’re trying to find the place where we can have the most impact. And so I’d say that’s what I’ve done through the career and that’s what I did when I got here to Stanley Black & Decker, the first stage of that in the pricing transformation was getting our pricing basics in place, you know, analytics, people in the right seats, the right processes. Once we got that, then we could go and find those next levels of value. We created a program to drive value pricing, which means let’s get involved with the product teams, with the sales teams and not just value pricing, value selling, overall value management. So all of that.
I think there is a natural, although a little circuitous route to innovation, it’s also building credibility through the organization and as you’re doing these things. So, build credibility over eight or so years. I also built the team that knew how to look at new opportunities, knew how to research new opportunities and ultimately know how to ideate and come up with concepts that were going to resonate in the market through this kind of pricing transformation, broadening to more commercial excellence type work. We got involved in the innovation world, build credibility, enough credibility to say, hey look, I think we’ve got some new business potentials that you know, we’d like to ask for funding and support to go drive. And so that was it. Out of this work, we identified a couple of new concepts that we quickly turned into kind of external startups and in parallel, the organization was interested in starting a brand new kind of external innovation group. So, we brought the startups together with this new innovation group and began to build a discipline around launching new businesses.
Mark Stiving: Maybe I have a certain lens on in my glasses, but I want to say what I heard you say in a way that makes me happy. And that is because we’re focused on price. We had to focus on value. What value are we creating, what value are we communicating and selling to our marketplace? And once we start started focusing on value, we saw new opportunities that we weren’t addressing. Would that be close to what you just said?
Kevin Lemke: Mark that was brilliant.
Mark Stiving: Okay. You can come back.
Kevin Lemke: That’s right. That is absolutely right. I do think we have a certain lens that makes me happy. What you just said. I think we do have that lens and it drives a lot of activities. And it did it. You’re absolutely right. It drove us to how do we focus on the value? Where can we deliver where we drive more value. And that’s, you know, in this case, launching new businesses.
Mark Stiving: Nice. Okay. Well, I should just quit now since I’m..
Kevin Lemke: I think we’re out now.
Mark Stiving: Actually, there are some other things I really want to know. What’s your perception of the difference between B2B pricing and B to C pricing? Cause I assume Stanley Black & Decker, certainly in the B to C world to a big extent.
Kevin Lemke: We’re in the B to B to C world more. But yeah, I mean the, you know the biggest difference is probably in the hand to hand combat and how you execute pricing on a day to day basis. B to C, I think you can be much more purely data-driven on the B to B side. I think there are other disciplines that we need to bring to the table aside from the data and the facts and it’s a lot more human behavior and it’s a lot more negotiating skills and it’s a lot more relationships. I think that’s kind of how I would break it down.
Mark Stiving: Yeah, I think I would agree with that, but I also think that when we as B to C companies focus only on the data, we missed that whole value aspect that we were just talking about. Right? We’re not out looking for where the value is that we’re not delivering or we’re not capturing.
Kevin Lemke: I think that’s absolutely right. And that evolution in the pricing discipline is much needed. I mean, I think we’re in a great spot these days with the application of value pricing. So, yeah, I don’t mean to imply that it’s just a data exercise. I’m with you 100%.
Mark Stiving: Yeah. I wasn’t blaming your company. I was, hey, we are going to have to wrap this up though, but I always end with this question. What’s one piece of pricing advice that you would like to give our listeners that you think could have a big impact on their business?
Kevin Lemke: One piece of advice, if I were to focus. One thing, Mark, I guess I would say, it does go back to this value piece and truly do the homework to understand what is it that your customers truly value and listen to them. It’s not one or two conversations. It’s a lot of data points. It’s continuous and bring your sales guys into the conversation and have them be part of making sure that we’ve got the price, the right pricing programs, and discipline. I think they need to be part of this. They benefit. We all benefit.
Mark Stiving: That was excellent. Kevin. Thank you. And thank you for your time today. If anyone wants to contact you, how can they do that?
Kevin Lemke: Yeah. Mark, thank you so much. I really enjoyed the conversation. I would love to hear from folks. You can find me on LinkedIn and my email is firstname.lastname@example.org
Mark Stiving: Yeah, I like it when people have AOL accounts. Alright. Episode 52 is all done. I have to say, my favorite part of the podcast today was when Kevin called me brilliant. How could I not like that? So, to our listeners, what was your favorite part? Please let us know in the comments or wherever you downloaded and listened while you’re at it, would you please give us a five-star review. They’re very valuable to us, so we would appreciate it immensely. If you have any questions or comments about the podcast or about pricing, feel free to email me, email@example.com.
Now, go make an impact!
**Note: Mark Stiving has an active LinkedIn community, where he participates in conversations and answers questions. Each week, he creates a blog post for the top question. If you have a question, head over to LinkedIn to communicate directly with Mark.
Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.