September 25, 2020
Apple recently announced Apple Watch Series 6, perhaps you watched the event? Always highly anticipated news for tech enthusiasts, there was a lot to enjoy, and ruminate on, for those interested in Commercial Excellence too. Apple Watch has a tiered pricing system – an old model, the new model, and a defeatured model. There’s associative products – iPhone, AirPods, and financing by Apple Card, and there’s also complementary services now bundled as Apple One.
What interests me more than anything is the product’s continued emphasis on health. The message is very clear and Apple is well-positioned to capitalize on it with the corporate identity also firmly rooted in privacy. Now with the Series 6, users can monitor their own blood oxygen saturation levels in addition to the previously available electrocardiogram (ECG). This is remarkable technology; it’s important to be able to assess your health and to take appropriate action.
This is a reasonable analogy for what we do in Commercial Excellence: assess the health of the organization and prescribe action(s) to remedy or to further optimize.
Here are a couple of charts based on real, yet anonymized data.
The above chart shows count of deals at given discount levels, over a period of time. Startling isn’t it? As it turns out – the three largest spikes represent the three major approvals levels that exist in this company. The three next-largest spikes are at “round” numbers – ending in 0 or 5.
This chart shows order by month of the year. This is only one year, but we also looked at prior years and they showed the same phenomenon. The X axis isn’t labelled, but I think it’s pretty easy to guess. Yes! The largest spikes are in the last month of the quarter. The effect would be even more pronounced if we did weeks of the year, rather than months.
The take-away from both of these charts is these occurrences, while absolutely true, build a narrative often seen in a commercial environment — there’s some inherent reality in the marketplace that creates these effects. However, this is simply not the case. These observations reflect only the effects of the policies and practices of the selling organization.
In the Deals by Discount chart, it’s clear that the concentration of deal activity around arbitrary and internal thresholds for approval absolutely undermines the refrain from the sales organization that the mythical “market price” is perfectly achieved on every deal. It’s so clear to see this. But this insight is only available (a) in the aggregate, and (b) with a visualization analytic.
In the Order by Month chart, this is a classic case of quarter-driven sales behavior. It’s simply true that customers don’t buy at end of quarter because they want to; they buy at end of quarter because we have trained them to do that. We respond to internal pressures (making the number) and that drives productivity by sellers. In turn, this creates an environment where buyers sense the urgency and request favorable terms or incremental discounts. Worse – where a salesperson, or a sales group, or even an entire organization is projecting falling short of their quarterly number, the message will go out “what can you pull in from the following quarter?” Once organizations get on that hamster wheel, it’s astonishingly difficult to get off.
If you’re worried about what an ECG would tell you about your heart, you should get an Apple Watch. If you’re worried about what it would tell you about your business, give me a call.
If you’d like to better understand the value strategic pricing could bring to your organization, try our Pricing Solutions Benefits Calculator.