Tales from the

in b2b pricing

You Can’t Eliminate Problems, But You Can Moderate Them • In B2B pricing...and every other

aspect of modern life...problems and challenges are inevitable.

• If we can handle them more effectively...and avoid a few altogether...that’s a big win!

• We can learn a lot from the experiences of others...the good, the bad, and especially, the ugly.

• A generic BI toolset was implemented to find and correct pricing outliers.

• But most “outliers” were easily explained away and the pricing team began to lose internal credibility.

• The tool was set up with a pre-existing “customer” segmentation, designed for a different purpose.

• False signals guaranteed!

The accuracy of this type of analysis will largely depend on the comparative basis being used.

To have a reasonable expectation that the pricing outcomes should be consistent and rational, the segmentation model needs to be specific to pricing dynamics.

As an improvement strategy, planning to play “gotcha” in this way is not ideal.

• The Pricing team went to bat for a 15%-off product promo that Sales wanted.

• At quarter-end, revenue was up nearly 21%! Unit volume was up 42%! Yay!

• Finance showed margin dollars down 19%! Boo!

• With pre-promo margins of 35%, they needed a 75% increase to break even.

• The blame fell on Pricing.

Even when you don’t have solid elasticity measures to tell you what WILL happen, you can use a simple break-even formula to figure out what NEEDS to happen.

Tribal knowledge and experience can then assess whether that’s likely...or not.

Shirking your core responsibilities is a terrible way to build a relationship with the Sales team.

• After implementing deal-level pricing guidance, the utilization was terrible.

• The “top” salesperson was actually quite proud of not using the guidance at all.

• The other sales reps just followed her example.

• The metrics and rewards were all based on revenue.

• A second major effort was required to save the first.

Generally speaking, people won’t change their behavior unless there are really good reasons to do so.

In B2B, you need to include the “carrots and sticks” in your planning processes and integrate those changes into your pricing initiatives.

It’s also a good idea to identify internal influencers and get them onboard very early in the process.

• A pricing team focused on the tactical, avoided risks, and never really pushed.

• The company was sold to a private equity group.

• Assessing the strategic pricing capabilities, they found them lacking.

• Which influenced their view of the existing team.

• They eventually brought in a new group of people.

The perspectives and priorities of upper management can change very quickly.

Right or wrong, others will tend to see what you haven’t done as a measure of your capacity to do those things.

Your “career” is bigger than your current “job”.

Your career is best served by taking the initiative to become more strategic.

• A leader had pushed thru an optimization system a few years before retiring.

• Her replacement didn’t know the how’s and why’s of what it was doing.

• It was “only” adjusting the prices up by 2-6% on 40% of the transactions.

• So, he shut it off! • Contribution dropped, but

no one was the wiser.

Even when you have the authority to just make things happen, it’s still advisable to gain broad support and buy-in.

Ongoing refreshers and reinforcement are needed to make something “stick”.

Document the what, why, and how so it doesn’t all just walk out the door.

Succession planning is the responsible thing to do.

• A pricing team got the OK to revamp incentive comp.

• When they rolled out the sophisticated solution, it generated a big backlash.

• They acknowledged their miscalculation, said “we hear you”, and went back to the drawing board in collaboration with Sales.

• The second attempt was not nearly as robust, but it was accepted in the field.

A very sophisticated solution may look “ideal” on paper, but the “best” solution is the solution that will actually be executed.

It is always a good idea to involve the affected group in a collaborative way.

Work to resist the natural inclination to get defensive.

A “mea culpa” never hurts as much as we think it might.

• Speculation about a new pricing function had been raging for months.

• In the info vacuum, a wall of resistance was created.

• From past experience, the new pricing leader knew better than to assume.

• So, he asked around. • At the next sales meeting,

he spoke to the fears and concerns very directly.

When entering new situations, getting the “lay of the land” is very important.

The reality may be different than what you’ve been told.

Unspoken concerns, objections, and fears can be insidious.

Don’t ignore them! Learn what they are and address them!

For any new pricing group, “enablement” is a great strategy.

• Management established a new pricing function at the corporate level.

• They expected “command and control” over pricing.

• But the group recognized that this wouldn’t work.

• A Center of Excellence was best, but they figured it would get shot down.

• So, they did it anyway and just didn’t call it a CoE.

Sometimes, you have to decide between doing as you’re told and doing what will actually work.

It’s a fine line, but as long as you achieve the goal, you’ll often have wiggle room as to how you did it.

The Pricing Center of Excellence model is great where there are multiple BUs.

While not required, formalizing the CoE is more effective.

• Nearly a year was spent on developing value-based prices for key products.

• After delivering the prices to Sales, nothing changed.

• Their idea of value-based pricing was incomplete, focusing on the numbers.

• They overlooked the need to “sell” the sales team, so they could sell customers.

• Part 2 was much more work than it needed to be.

With value-based pricing, the numbers themselves are just half the battle.

For the numbers to have any effect, the value they represent needs to be credibly demonstrated.

To make an effective case, the salespeople need to believe it!

It’s much easier to develop the “proof” and “evidence” as you go, rather than after the fact.

• Turnaround on quotes and exceptions was slow.

• The obvious solution was to add more headcount.

• In a year, the Bid Desk team grew to almost 40.

• A new hire asked why nearly 50% of the deals were being routed?

• Fixing the real problem (the prices) eliminated the need for 75% of the team.

Before jumping to conclusions, make sure you’re focused on the real problem.

The “5 Why” process is easy and effective.

When tempted to “add bodies” to solve a process volume issue, look harder at the process itself.

Look for external benchmarks.

When you build a big team, change can be hard and painful.

Some Recurring Themes... Many of the common challenges stem

from a lack of consideration for the organizational dynamics involved.

In other cases, issues arise when the basics are ignored or fundamentals are lacking.

When people slow down and step back, they seem to be able to navigate the situation much more effectively.

Studying lots of these situations just reinforces the importance of “thought” relative to “action”.

Questions & Answers (Questions definitely. Answers hopefully.)