February 26, 2014
If I asked your marketing and sales organization whether they thought the pricing organization was more partner or more police, what would they say? If I asked the pricing organization what they aspired to be, partner or police, what would they say? Ideally, they would aspire to be partners. Most pricing organizations go through the growing pains of initially “being the police,” however the organizations that add the most value (by far) are the ones that grow into partners.
How can your organization mature into partners? Take a page from good value-based pricing:
• Understand the customer’s needs (i.e. marketing & sales needs)
• Create value (i.e. your pricing advice)
• Communicate your value (to be sure it is understood)
• Have credibility (i.e. so they can trust your advice)
• Be sure you set the right value/price balance (i.e. the value you deliver must be worth the effort/time they must ‘pay’ for this value)
The five suggestions below will help you transition to value-driven partners.
1. Common Goal:
You must work towards a common objective. If your goal is to achieve the highest price and their goal is to achieve the largest growth, it’s a show stopper. A goal that drives maximum profit, i.e. the sweet spot of price/volume trade-offs, is a great business savvy common goal. Sales incentives and business performance metrics need to support it.
2. Common Understanding & Training:
Marketing & Sales need to have a solid understanding of pricing, from price strategy & setting through price execution, so they can both appreciate your actions and partner with you for successful execution. At DuPont, I taught 2 day workshops tailored to marketing, sales, product managers, and business leaders. We supplemented this with on-going skill building (i.e. webinars, newsletters, etc.). It was a critical step in our success.
3. Advanced Pricing Skills:
Transactional pricing might be where your group starts, but you will need to advance into value-based pricing (including segmentation) and strategic pricing. To do either of these well, some of your resources should have deep marketing and business backgrounds. Without that, you probably will not garner the credibility (nor the skill) that you need for success. In DuPont, we started with a team heavy in finance and light in marketing background. Over time, we shifted resources to bring in a few experienced marketing managers, and we supported evening MBA’s for our top analysts. This went a long way towards our credibility and ability to add value.
4. Make it Easy!
Do you create extra work for the commercial team or slow down their price proposal response time? Or do you make their lives easier, help them make smarter, faster decisions? Initially, this may mean providing them with insightful and easy to understand analytics. Later, you might champion pricing systems that facilitate pricing processes in a way that drives better, faster decisions.
5. Relationship Building:
It probably goes without saying, but treat the commercial team as you would like them to treat you; as a respected, value partner.
To learn more about how to advance your pricing organization, join me and other pricing leaders at Profit Summit 2014. Learn more and register today, here.