The Importance of Pricing as the Path of Least Resistance

As a pricing professional, are your colleagues in sales, product management, or other departments working with you or trying to find an easier, quicker path? In this article by Chris Kennedy-Sloane, Business Consultant at Vendavo, discover why pricers must consistently add value and ease to any process they are part of.  

You’re probably very familiar with the concept of desire paths in your day-to-day life. These are foot-worn paths, often off the beaten path, where a quicker way has been perceived by a walker or cyclist. Humans are exceptional pathfinders and pattern matchers. That means that sometimes they take shortcuts or travel unintended paths. Desire paths appear in our business lives just as often as they do in our personal lives. 

Prioritizing Ease Over Perfection in Pricing 

As a pricing manager, we often strive for perfection. It’s easy to add question after question in a CPQ solution, while searching for guidance around the perfect product and the perfect price. Equally, in approvals processes it is easy to continue to add more  clarifying questions, digging deeper into the proposed solution or product and the rationale for the discount or rebate which has triggered the approval. 

Inevitably, this can result in frustration from our colleagues in sales or product management and trigger their desire to find a quicker path. Overcomplicated selling or pricing processes create a perverse incentive for our colleagues to circumvent the pricing function as a whole, often with dangerous results.  

It may be that, through luck, their product launch or sale process is still very successful which can generate questions from senior management about the value of the pricing department as a whole. In addition, it reinforces that pricing can be circumvented, setting a precedent for future situations. 

As pricing professionals, we have to demonstrably add value and ease to any process we’re a part of, otherwise we risk being part of none. 

Add Ease by Understanding Your Value Drivers 

But, how do we balance the requirement to collect data to make a recommendation with the need to be easy to work with? One method is to better understand what factors actually impact our price. Yes, you can ask all the questions, but how many of those datapoints are truly impactful to the overall pricing? 

In one example, the Standish Group researched how many features of 100 pieces of custom developed software were actually used by consumers. They discovered that only 20% of the features were used frequently, 30% infrequently, and 50% not at all. And these are custom developed applications!

What this means is that from a pricing perspective, only the 20% of features frequently used would have had a major bearing on the price. The same applies across all industries, and the need to understand not just your value drivers, but the magnitude of those value drivers. Understanding your value drivers and their impacts can help inform simplification in your pricing processes to keep the business moving.  

It’s an old refrain, but the pareto principle comes true time and time again. Don’t let perfect be the enemy of good in pricing practice.  

Add Ease Through Technology 

The other solution is to add ease through technology. This can take many forms, but it’s the combination of many practices that can allow pricing professionals to collect just that bit more data without creating a roadblock for a process. Here are just a few examples: 

• Allowing quote data to be input on the move in mobile applications can smooth sales’ interaction with quoting tools, as they’re able to use formerly dead time to complete this admin work. 

• Using machine learning and strong relational databases to pre-populate as many fields as possible, allowing a process to lean towards asking humans only to correct mistakes, rather than create data through answers. 

• Create assumptive models for less-used datapoints based on historical data and forecast these forward as predictive modeling, so that these datapoints only need to be refreshed infrequently.  

• Ensure that fields are exclusionary, with irrelevant questioning removed algorithmically from the process flow rather than requiring input just to say ‘not applicable’. 

There are many more out there, but the key point here is that pricing or commercial excellence departments in businesses should always be aiming to be as easy and enjoyable to work with as possible. A truly optimized process will add value, and even potentially speed, causing business to route itself to you rather than away from you. 

Make your pricing department the path of least resistance, and your colleagues will make you part of their desire path. Need help? We’ve got your back. Vendavo can help you transform your pricing processes and technologies to make it easier for your colleagues to do business with you. Contact us to get started.