Become a Pricing Champion!
I love pricing. I love the fact that this is a measure of how well a company designs, builds and markets a product. I love the fact that it’s a number. It’s not squishy. I love the fact that you can measure the effects of changes. But what I love most of all is the power pricing has to drive increased profitability. Pricing is amazingly powerful … when there’s a champion.
One of the biggest problems with pricing is that nobody in the company owns all of the pieces. Some parts are owned by product management or marketing. Some are owned by sales and some by finance. And some are owned by the executive team or whoever has profit and loss responsibility. It seems like everybody has their finger in the pricing pie.
With so many people involved, it is challenging to make changes. Maybe we all meet and change a price or two, but try to change the systems or methodologies we use. Or worse, try to modify the pricing model. Ouch. It is nearly impossible to get all of these groups aligned to where they agree to make any significant change.
Enter the PRICING CHAMPION. Ta Da!!! (Did you hear the music?)
A pricing champion has to be a superhero to cause change. You see, pricing people rarely have authority. They don’t get to tell the other departments what to do. Instead, they must use influence and that requires three crucial characteristics: pricing expertise, data analytics and leadership.
Pricing expertise is the most obvious. Pricing champions understand the nuances of pricing. They know different pricing models. They think in terms of willingness to pay and price segmentation. They get excited about all of the possibilities when pricing product portfolios. Not only do they know costs don’t drive pricing, they feel it deep in their soul.
The skill of pricing expertise can be learned. People learn in different ways. Some read pricing books. Some network with pricing experts. Some take classes. All of them have to shift their focus to how buyers make decisions and how that drives profit. Pricing is the mechanism that turns buyers’ decisions into profit.
A pricing champion must also be comfortable with data analysis. Some (lucky) champions have statisticians to help them crunch the numbers, but the pricing expert still has to drive the analysis. There are two basic types of analytics needed. First is determining the additional profit a company can make by changing something in the pricing process. If this profit isn’t quantified, a company will not invest in the change. Second is articulating models for how buyers may make decisions and testing the validity of these hypotheses. People with pricing expertise may believe they know how buyers make decisions. A pricing expert who uses data really does know.
In this era of big data, there are more classes coming on line or at universities to help people grasp the “big picture of big data” without becoming statisticians. Although this skill may not come naturally to many people, it’s crucial to becoming a pricing champion.
The third crucial skill exhibited by pricing champions is leadership. Unfortunately, there are a lot of smart, analytical people who don’t have the people skills to truly drive change. (I used to be one of them.) It seems that what it takes to be great at the first two skills are often the opposite of leadership. We love numbers. We love analyzing and building models. Data tells the truth. People? They are hard. They don’t always behave the same. They can be irrational or illogical. Ugh.
However, pricing champions drive change. They have the ability to influence. They lead other departments into the promised land of understanding, creating and capturing value. This may be the hardest skill for most pricing people, but without it a pricing person is just someone with good ideas.
Learning the soft skills of leadership is hard. Thousands of books about leadership expound on how to do it, but there are so many different opinions. Here are two pieces of advice: 1. Join a volunteer organization and become an officer. Nobody in your organization has to do anything you tell them, so you have to learn to lead. 2. Find one or more mentors. Identify people you look up to as leaders, people who seem to be able to influence others. Ask them for hints and feedback. LISTEN to their feedback with intense curiosity. Assume they are right.
I have met and interacted with many pricing people who are excellent at one or two of the three characteristics of pricing champions. They are always smart and fun to work with. However, they have very little influence in their company. Leadership tends to not listen to them.
Without a pricing champion, companies rarely enact significant improvements in pricing. If you are in pricing and are not as successful as you’d like to be at driving change, you would likely benefit from improving in one of these three areas (probably leadership).
Pricing champions drive pricing change.
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