October 14, 2013
A few weeks ago, I presented to the Simon School of Business at the University of Rochester on “The Future of Pricing.”
At Vendavo, we spend a lot of time thinking about how the B2B pricing space will evolve so that “we can skate to where the puck will be.” This helps us to anticipate and create the next generation of profit optimization solutions.
So, what is the future of pricing all about?
1. It’s not about pricing, but profitable selling at the Moment of Truth.
Profit happens at one “moment” in every business, the “Moment of Truth.” This is when you put forward a price and ask for your customer’s business. Companies thrive by arming the front line sales team with all the insights they need to be effective at this point of negotiation and drive profit on each and every deal.
2. It’s all about data.
Fundamentally, pricing and the transformation of commercial processes make data an immeasurably valuable asset. Treat it like a corporate asset, enrich it and add to it. Take a look at the drivers of value, of customer loyalty: What are the metrics? How can they be leveraged in commercial processes?
3. It’s about creating better art through science.
While all other major corporate functions are transforming, Sales is still making million dollar decisions with tribal knowledge, anecdotal information, gut feel, and instinct. This does not mean leaving behind the art, but rather, infusing it with science by replacing tribal knowledge with data and gut instinct with algorithms.
4. It’s about determining the winning offer.
What is the right price? You, as part of the pricing team, have the data, the analytics abilities, and the alignments skills to lead the way in answering this key question.
5. It’s about finding the better answer, not the perfect answer.
Yes, the data is imperfect, but it is certainly better than a salesman’s instinct in most cases. Using data analytics to determine the winning offer enables one to find a measurably better answer that narrows the range of outcomes and eliminates bad choices to help predict the path that is most likely to win. So, don’t fall back on instinct and gut just because you don’t have the perfect data – opt for better!
6. It’s not about you, it’s about the Sales people.
The difference between B2C and B2B is the 1.8 million eager salespeople making decisions, negotiating, and executing commercially with the insight you give them. Succeeding at the “Moment of Truth” depends on a combination of data and human nature. This means the next challenge for pricing teams of the future is to help every sales person arrive at negotiations armed with the profitable selling insight they need.
7. If you are not just a little uncomfortable, ask yourself if you are pushing hard enough.
The future of pricing involves lots of data, lots of measurements, understanding the human negotiation dynamic, and the use of “experiments.” Companies must be constantly learning, measuring, improving, and reacting or they will be left at a competitive disadvantage.
Pricing as a discipline is about to get enormously more complicated, more capable, and more valuable. So, don’t let your organization fall behind – learn more about how you can sell more profitably from Vendavo.
Watch my full lecture here.