October 23, 2019
Any transformation demands a cultural transformation. This is especially true with pricing. A cultural transformation is the only way to evolve mindset and embed pricing processes into the fabric of an organization. Most pricing transformations do a good job of addressing the technical and process side of pricing. While this is a good start, it isn’t enough. To create irreversible change, pricing teams need to tackle deeply rooted routines, perceptions, beliefs, norms, schemata, and mental frames.
Why Transform Pricing Culture?
- Technical pricing assessments miss the cultural and social dimensions of pricing.
- A pricing culture can strongly influence pricing success (positively or negatively).
- A pricing culture evolves over time with pricing initiatives and activities.
- What gets measured gets managed formally.
A pricing transformation starts with the right assessment of your pricing capabilities. Most companies will conduct a deep Pricing Capabilities Assessment (PCA) which consists of surveys and qualitative discussions with internal stakeholders. PCAs focus on systems, processes, tools, skills, and structure for example. They can be done in 2 to 4 weeks with the end goals of identifying pricing maturity level and the development of a pricing transformation roadmap. What is less commonly done is a deep assessment of a pricing culture.
In 2016, I developed a pricing culture assessment with the goal of calculating a Pricing Culture Index (PCI). This helps organizations gage their level of pricing culture during the discovery stage of their transformation.
The benefits of PCI are numerous:
- Establishing a benchmark for all cultural dimensions of your pricing culture.
- Adding quantified cultural data to your pricing transformation dashboard.
- Tracking progress of your pricing culture overtime as pricing projects get deployed in the organization.
- Addressing the cultural priorities prior to the design and deployment of pricing programs.
- Designing specific sets of activities at the regional, BU or functional levels.
- Making top management aware that pricing culture is as important as technical pricing capabilities.
The PCI is an internal survey distributed to all internal stakeholders who have some involvement in the pricing function. They might be directly involved in pricing (pricing, marketing, and sales) but they might also be exposed to pricing discussions during business meetings (management, innovation, finance). Generally speaking, you want to make sure you involve and survey all go-to-market functions.
Dimensions of the Pricing Culture
The PCI survey focuses on 8 management dimensions that directly impact pricing transformations. These dimensions and corresponding items have been developed based on my doctoral work as well as other cultural instruments developed for marketing and innovation. The measurement instrument has been academically tested over the last 5 years. The dimensions include some of the 5C model described in my 2012 book, The Pricing Journey: The Organizational Transformation Toward Pricing Excellence.
The 5C model of pricing transformation includes change, confidence, champions, center-led structure, and capabilities. In addition to these Cs, is collaboration and alignment which are commonly cited as organization roadblocks to long-term transformations. Finally, current perceptions about pricing and the quality of execution can also accelerate or derail your transformation.
If you have a transformation already underway, you can still assess your PCI. It is very helpful to see what is happening in your culture and what might accelerate the transformation of your pricing mindset. Often, pricing transformations are stuck in a zone of good intentions because the culture is resisting. You need to make it a priority to address the zones of frictions between teams and remove some of the cultural obstacles. Some call these a nice-to-have. In my experience, it is a must-have and an integral part of your transformation journey.
For more insight on how to ensure your pricing transformation is both effective and efficient, download the whitepaper, 10 Tips for a More Successful Price Optimization Project.