Over the past few months, I have conducted several research projects to gauge the progress of strategic pricing in large firms. As a profession, we have a long way to go to match the progress other functions such as supply chain, analytics, and sales enablement have made. As evidenced by my research, the lack of adoption is due to a few issues in the C-suite.
CEOs and other C-suite executives do not fully grasp the power pricing delivers and they do not fully appreciate the strategic nature of the pricing function. Of course, many CEOs have gotten that right. Companies like Microsoft, Medtronic, Disney, Apple, Schneider Electric, 3M, and others have launched strategic pricing transformations with impressive results.
I am calling on all CEOs to get started. Here are 10 things to do over 30 days to get started on the journey toward pricing excellence.
- Find out who’s on your pricing team and the person in charge: Let’s be frank. If there is a price on an invoice, someone has decided on the pricing tactic and has set the price level for that invoice. Your first action is to find out who is involved in price setting and price getting activities. Request from HR an organizational chart of all professional charts involved in pricing and get a meeting with the various leaders. If you are lucky, you have one or two people showing up. If not, be ready to receive up to 15 people. Don’t be surprised if this is the case.
- Hold a meeting with the person(s) in charge ASAP: Get to know the people involved in your pricing and (finally) put pricing on the organizational radar. Task a person in your Project Management Office to map out the various interactions and a first pricing process map. Chances are that if you have ten divisions, you might end up with ten different process maps.
- Request an internal corporate PCA (30 days): During that meeting, task the leaders or volunteers to conduct an internal audit of pricing activities in the form of a formal pricing capability assessment (PCA). PCAs are standard in the early stages of pricing transformations. They can be conducted in 30 to 45 days, depending on the depth and width of your organization. PCAs cover the typical dimensions of the pricing discipline: strategy, operations, systems, data, skills, etc. They can also integrate qualitative interviews and a review of pricing documents.
- Set a training for the C-suite on the foundation pricing: This is an emergency action. Research shows members of the C-suite hold various perceptions about pricing. Invite a pricing expert to speak to your executives on the reality of what best-in-class companies are doing and what is needed post COVID. Pick the right expert! First impression is key.
- Request an industry benchmark: Along with the PCA and the training session, task your internal strategy group to find best practices from our industry and from our competitors with regards to value and pricing management. That will help with raising the sense of urgency and address the usual objections.
- Establish a pricing council with relevant executives: Bring your relevant leaders together to form a corporate Pricing Council. This shows that pricing is on the organization’s radar and top management is paying attention. Select divisional Presidents to attend along with their top sales, finance, marketing, and relevant pricing leaders. The outcome of the PCA and the initial plans will dictate if this first meeting needs to be repeated once or twice per year or if the Pricing Council should he held across each division.
- Request a two-year roadmap for pricing improvement: Based on the results of the PCA, your team should propose a two-year, all-inclusive roadmap focused on short-term and mid-term pricing improvements with the associated EBIT impact. This roadmap needs to include technical, social, and organization components to insure adoption, integration, and assimilation of pricing.
- Attend a pricing society conference: You will learn a lot from attending one pricing conference in your career. You will hear from the best and discover the richness of the discipline. You will meet relevant experts and technology partners in two days. Finally, and symbolically, prioritize pricing on your agenda. This is critical for the adoption of pricing in your organization. Visit pricingsociety to find the next pricing conference.
- Block time to attend a Pricing Council once per quarter: Similarly, attend one division Pricing Council per quarter, in the form of a rotation. This way, you will stay connected with your pricing teams and show your C-suite and top management that pricing is critical in the new normal. You can also put pricing in your C-suite management meetings twice per year to bring everyone up to speed on the programs and to track progress.
- Set quarterly meeting with the top pricing executives: Many CEOs do this. They meet with their VP or Director of Pricing one-on-one to gauge the progress of the program and to get a neutral and unbiased view of the integration and assimilation. The CEO plays a key role in beating the drums and removing organizational bottlenecks.
I know times are tough and cash is scarce. Getting started does not require much cash – less than $50,000. For this amount, you are on the road to better pricing and sending the signal to your organization that pricing matters as part of the COVID recovery process. The new normal will be more digital, will require more e-commerce, will need more segmentation and personalization, will create new business and revenue models, and must focus on profitable growth. For that, you need strategic pricing capabilities.
The time is right. Join the pricing revolution.
For more, plan to attend a session led by Stephan, Profitability and Pricing in the C-Suite: What’s on the Minds of BU Leaders on October 14 as part of Commercial Excellence Month Live. Also read: 5 Things Every CEO and CFO Must Know About Pricing.