“Everybody touches pricing, but nobody owns it!”
Does this resonate with you? If yes, then it’s because this is a common complaint in the adoption of pricing initiatives, across companies. It’s not just the right price that is important, but also the system and associated processes of pricing.
It's not the pricing, but it is your pricing systems that really helps you win, and allows your sales engine to run smoothly at scale while capturing revenue from the market.
So pricing strategy apart, it is pricing operations that is front and centre, but is often riddled with challenges.
Joshua Bloom, Managing Partner (North America) at Simon-Kucher & Partners, explains the nature of these challenges in pricing operations, and how they can be addressed. The following passage was originally published in my book, Price To Scale.
There are a few challenges in pricing operations that are pretty common.
One pitfall is having a discounting policy where everyone is just going through the motions
It lives on a piece of paper, but nobody follows it, or it doesn't lock down in a system, but you have 99.9 percent of requests just being rubber-stamped. A well-run process will maintain some tension! This could be in terms of different stakeholders getting involved, not just salespeople.
It could really ideally surface in escalation discussions – what are the key strategic factors that would cause us to discount in situations where we ordinarily wouldn't? Is it that you're up against a different competitive set than maybe normal? Is it that you are trying to land an account where there's significant opportunity for growth in the future?
You need to document what is different about this deal; you need to list out the number of units being purchased, the pricing you’re testing, and the relative discount; and then get it approved.
You’re not really approving a number. The ideal scenario there is that you’re proving the deal strategy, or thinking of why you are deviating in a particular case. The vast majority of organizations do not have this in place. They either have nothing or they have a process that just looks like they are going through the motions. This is a big factor to consider.
The other thing is not analyzing pricing performance.
From a pricing operations standpoint companies often create fairly robust processes when it comes to new product pricing. They’ll have stage gate processes of how the initial list price gets approved but often forget that they should be regularly reviewing the pricing for their existing products on an annual basis. When you have a lot more information on your existing products, in some ways it should be easier and a more fruitful discussion on contemplating pricing change.
To conclude, this Accenture article states that the future of pricing is one that reaches end-to-end across the value chain. This will not just steer sales and improve margins, but will also be leveraged effectively, to foster enduring customer relationships, ecosystem partnerships and, ultimately, fuel innovation, competitiveness and growth. Pricing operations put in motion by an efficient pricing organization will make this a reality.