When you undergo a change in price strategy or if you are creating a price strategy for the first time, you quickly understand the reach of pricing – it touches people, processes, and tools throughout the organization and reveals its soft spots. Product portfolio, competitive differentiation, marketing and messaging, launch processes, decision rights, pricing and negotiation skills, sales incentives. Deficiencies in any and all come to light when pricing is revamped, and these are all areas senior leadership should consider to drive revenue growth via price.
If your financials are headed in the wrong direction, and you know price is a contributing factor, it's time to figure out why. But you might be wondering, what are the next steps? and what do I need to take those steps?
For starters, you'll need an analysis tailored to identify the customer and product cohorts that are the biggest offenders, and therefore, opportunities. You'll also need a dedicated team to define, execute,and manage a plan to begin the pricing recovery.
It is not enough to have a pricing team in place; you need to consider three areas: pricing, process and tools. Are their responsibilities defined? Who sets (approves) list prices? Deal prices? How does the deal desk fit into the mix? Are the accompanying pricing processes defined so they can be quickly executed and not recreated each time, delaying the impact of price actions? If the only tool available to manage pricing is Excel, how can you structure your data to be as efficient as possible? What are other options?
Whether it’s a new innovation, mature SKU, or a product you are transitioning to SaaS pricing, how do you set the right price and what price strategy should you use: value, market, or cost+. Hint: there is a place in the pricing world for all. Different products and product lines, as well as your company itself, compete in the market in different ways with different levels of differentiation. Different products and product lines, as well as your company, compete in the market in different ways with different levels of differentiation. That’s what drives price strategy.
When your products, and don’t forget your services, drive incremental revenue, reduce costs, or reduce risks for your customers more so than your competitors, you should get paid for it. But it’s not enough for you to know it – you have to show it. Quantify value, then enable your sales team to sell on that value through education and communication. Don’t forget your Give-GetsSM if you do get asked for a lower price.
Price leakage comes in many forms, whether it’s a standard discount, rebate, promotion, payment terms, freight, giveaways, etc. On invoice, off invoice. Oftentimes, data is the prohibiting factor in seeing the factors and severity of the levers negatively impacting price. It is a big ball of knotted cords – where do you start?
Pricing is an amazing way to fuel transformation at your company, as well as a chance to shed light on some of the aspects of your business that need the most attention – processes, people, tools, etc. But at the end of the day, it's about shifting away from spending all your time on cost when the best return is to shift that energy and resource to managing price.
Adele McLean Holden Advisors
We enjoy putting an end to profit leakage for our clients. To do this, we will help you implement an improved pricing discipline that introduces better decision making around price.
Erin Cihak Holden Advisors
We are a team of B2B value, pricing, and sales performance experts operating on the frontlines of helping companies develop value know-how, build cross-functional alignment and enable market-leading results. Using our proven initiatives, we fuel transformative growth for our clients, in revenue and profits, close rates, ROS, margins, and internal cooperation.