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Stop Doing These 3 Things to Shock Your Pricing Culture

Paul Sansom< Paul Sansom June 3, 2022

Services companies that are invested in improving their organization’s pricing strategies will face a unique set of challenges on the road to profitability. Pricing challenges are often technological, commercial, or analytical by nature, but it’s also important to consider the cultural roadblocks that may be holding you back from lasting improvement.

Pricing transformation is a marathon not a sprint. You have to prepare your teams and culture for an electro-shock. Any company embarking on a path of pricing transformation requires a crawl, walk, run mindset. You need to move at your own pace and select the right sequence for your unique pricing transformation journey.

Moving from cost-based services to value-based services and bolstering cost recovery is no easy task, but building a robust data infrastructure, using segmentation analysis, and rethinking your incentive structure are just a few technical and process changes you can make to get started on the right path. You can read about more best practices for improving the price of your services here.

Most pricing transformations do a solid job addressing the technical and process sides of pricing, but miss the mark when it comes to people. If you want to transform pricing in your organization, you need to assess, and likely fundamentally change, your pricing and sales culture.

Common cultural pricing issues are often masqueraded as organizational goals or policies that leaders put in place to win more work or generate more revenue. While often well-intentioned, these revenue-generating goals and policies often have the exact opposite effect, hindering sales and stagnating employee efficiency. Here are three things to stop doing today, in order to shock your pricing culture and shift the way your organization pursues, achieves, and measures success.

money icon1. Stop classifying opportunities as must-wins

Frankly, the concept of must-wins should be eradicated from service companies’ dictionaries all together. That may sound forthright, but a must-win is often an arbitrary classification bestowed on an opportunity as a reaction to a decreasing backlog or a poor forecast.

When was the last time an opportunity received a must-win distinction from leaders in your organization? Did you pull out all the stops to secure the deal? Did you lower prices, increase your risk tolerance, or take on restrictive or unattainable performance expectations?

Must-wins can create enormous and unnecessary pricing pressure, forcing your company to take on additional contractual and performance risk, and putting you in financial, or even legal danger. Must-wins must go.

gear icon2. Eliminate utilization targets

Another KPI that often sends the wrong message to your team is when you set utilization targets. Measuring the performance of your employees based on how busy, efficient, or productive they are will not only limit the quality of work and value they are driving for your organization, but it can also cause employee burnout and turnover.

A more modern solution and one that prioritizes value, is to shift from utilization targets to margin or profitability targets. This kind of target will incentivize managers to focus more on price and value and less on filling time. Enlisting margin or profitability targets can lead to massive business benefits like:

  • More creative pricing strategies
  • New service lines
  • Entrance into new markets
  • More efficient work processes
  • More value-driven approaches to service execution

Alternative goals, can be used in conjunction with margin and profitability targets to incentivize things like new logos, service expansion, customer satisfaction, and/or repeat business. These alternatives empower your employees, from the top of the organization to the bottom, by rewarding them for growing your top line.

Why wear your employees down with utilization targets, when you can empower them with margin and profitability targets and help them transform from mere order takers to strategic value drivers for your organization?

talking icon3. Stop talking about your services before you address your clients’ problems

A common thread many services organizations weave is getting hyper-focused on the service or services they provide, rather than leading with and understanding their clients’ problems. This often manifests itself in the Cheesecake Factory Menu of services – giving your clients an almost-endless list of things your company can do, without a clear understanding of their problems. Not to mention, you’re most likely missing clear value points in promoting and differentiating your services if you aren’t able to pinpoint the actual challenges you’re solving.

You have to get away from this inside-out thinking. If you do not effectively communicate it, your clients will not see the value or differentiation of your service over your competition. And remember, your competition is no longer just similar service providers. You are also competing against client inaction or do-it-myself service.

You have to accurately communicate the value of your services in a language your clients will understand. That is, you must show your clients that you understand their challenges and tell them, point-blank, how you can help them solve them. Don’t be afraid to wear your sales hat here. Are you just fixing a leaky faucet or are you preventing thousands of dollars in water damage? It’s all about fine-tuning the message for your audience.

If you want to transform pricing in your services organization, you have to take a long, hard look at your culture. Putting an end to must-wins, utilization targets, and inside-out thinking are just a few things you can change that are sure to have a lasting impact on your pricing culture.