Pricing transformation projects might seem daunting, but the time and effort is worth it – especially if you can get executive and stakeholder buy-in before, during, and after implementing pricing technology. In this article, Chris Kennedy-Sloane, Business Consultant at Vendavo, explains what goes into a pricing transformation, the pitfalls that often derail the process, and why the potential business benefits are well worth the effort.
Vendavo recently held our annual Growth + Profitability Summits in both Chicago and Stockholm, each with a panel exploring how to successfully “Demonstrate the Value of Pricing Transformation” projects internally. The panels focused on understanding why such projects are needed, what happens when you aren’t successful at communicating their value, and the potential positives that happen when your business stakeholders understand the exceptional impact pricing transformation can bring.
Our Chicago attendees heard from Matt Altimari, Vice President of Finance at Genpak; Anne Lewis, Senior Pricing Manager at Afton Chemical; and Christopher Sorrow, Managing Director at Blue Ridge Partners, all of whom offered key insights into the pricing transformation process.
This article summarizes what we heard from our panelists.
What is Pricing Transformation?
Let’s start by defining what we’re actually talking about. A pricing transformation is any project or ongoing process designed to change or improve the technology, people, and processes surrounding price in an organization. These could be focused on one area – like cost management or apportioning, list price management customer discount or rebate management, among many others – or a holistic overview of a business’s pricing waterfall.
Whether they are specific and tactical or general and strategic, pricing transformations will seek to create change. And, they are almost always expected to result in measurable improvements in business outcomes like sales revenue and margin, operational excellence, or improved internal or external stakeholder experience.
What Goes into Pricing Transformation Projects?
What feeds into a pricing transformation project may seem nebulous, because it involves many teams and departments throughout an organization. That means people will be needed at multiple levels to cover a variety of roles, including:
- An executive sponsor who commits both authority and resources to the process
- A project team that’s empowered to plan and use those resources to meet the project’s objectives
- Stakeholders (internal and external) who can provide feedback on the goals and needs of the business and project as well as the results – particularly less-tangible ones such as measuring stakeholder experience
These project teams must create and manage a process framework to keep the pricing transformation on track to be a success. These processes are also often targets of the project’s objectives.
Here are some examples:
- Project management framework processes, defining timescales, objectives, and executive review
- Pricing process maps that feed into the project as inputs, with the expectation that these will be refined and improved
- Measurement and KPIs to understand successes (and failures!) of project outcomes and to define a system to assess this
You’ll want to determine your measurement tactics and KPIs before beginning your pricing transformation project. This will help you gauge success from start to finish, and enable your team to make shifts as needed to keep things on track.
After you’ve got your people and processes, you need to make sure you’ve got the right technology to take your pricing transformation project across the finish line. Technology enables the people and processes involved in the pricing transformation through the ability to better accelerate, manage, and understand the change.
Here are a few things to keep in mind:
- Management software allows geographically disparate stakeholders to collaborate better.
- The goal of a pricing transformation may be to implement a particular solution, such as a list price management system or a configure, price, quote (CPQ) solution to enable more accurate list pricing or improved customer quote times.
- Technology can also be a powerful enabler for the measurement of pricing transformation success.
- A stronger understanding of the price-volume mix dynamic of the business can make it easier to see the financial benefits of a price transformation.
- Modern analytics around software solutions can show adoption and engagement, and create easier avenues for feedback to flow through the business.
Selecting the right technology pieces for a pricing transformation within an organization is key to ensuring you have the best chance for success – and can often be one of the easiest to overlook.
Reach out to an expert if you’re interested in learning more about how pricing transformation can positively impact your business.
Pricing Transformation Pitfalls
Impacting key business levers is a powerful tool for pricing and commercial excellence professionals. The opportunities for success are great, but so are the risks of failure.
One of the largest risks is failing to demonstrate the value to the organization of a pricing transformation before, during, and after a project. You need to make sure that your milestones are achievable so that value can be demonstrated early and throughout the process.
Failures like these can quickly sour stakeholders’ and executives’ attitudes during a pricing transformation.
Losing your C-suite and stakeholder buy-in has even more ramifications. Failing to capitalize on the opportunity to show the value in a pricing transformation loses the business the potential ROI that pricing and commercial excellence professionals know can be hugely impactful to the bottom line. Worse yet, you could lose control over pricing entirely as sales processes become wilder over time.
Poorly managed pricing transformation projects can also result in pricing teams and the organization losing credibility, particularly if pricing becomes visible to customers without a strong link to value. This can make customer negotiations more difficult over time.
The Benefits of Pricing Transformation
But, pricing transformations also come with great potential for businesses and the stakeholders that initiate, manage, and complete them. Showing value early in a pricing transformation can be key to further support, and can help to convert previous skeptics, or even detractors, into champions of your pricing transformation process.
A few key facts to keep in mind:
- Pricing and commercial excellence professionals know that pricing is one of the most important levers to improve revenue and profitability. The ROI is one of the most tangible results of a successful project, but it’s not the only one.
- Effective, logical, and value-based pricing with powerful guidance can help with both your customer’s reactions to price and with smoothing sales acceptance and communication of pricing changes.
- Building a common language around the impacts of the price transformation project’s results smooths the process of continuous improvement, too, plus ensures alignment on reporting and understanding the results.
And of course, where one success happens, the expectation is that others may follow. A positive experience with pricing transformation can create space and justification for future investment from the executive team.
Vendavo Can Help with Pricing Transformation Projects
Vendavo has been helping our customers with pricing transformation projects for nearly 25 years. We can’t wait to make our resources available to you. Reach out to today to speak with an expert who can answer your questions.