Pricing Strategy
& Operations Diagnostic
Pricing Strategy: Diagnostic and workshop program
- Identify sources of earnings risk
- Discover new opportunities for margin expansion
- Build strategic alignment and capability across Executive and line management
- Develop a series of quick wins and longer-term initiatives for earnings growth
Insights
Without a documented pricing strategy, your margins are at risk
More than 80% of the companies we’ve worked with across the last 10 years do not have a documented pricing strategy.
Consequentially, they are almost certainly leaving substantial sums of money on the table at every negotiation. Internal conflict about how to set and manage pricing is common within companies. Without a unified strategy, the net result is usually inconsistent prices and margin erosion.
If a pricing strategy does exist, it’s often locked inside the heads of a few Executives. This lack of clarity trickles down to the rest of the organisation. The outcome is often a series of reactive behaviours that attempt to deal with competitors, customers and general market forces.
Without a dedicated pricing plan, your business cannot grow profitably.
Insights
Markets are becoming more competitive
Low cost online players are disrupting the market and customers are becoming more fragmented with specific need states.
Customers are also engaging procurement teams to extract price concessions from unprepared sales teams.
In addition, many companies now have a long tail of products and customers, yet no way to manage simple tasks such as price increases without engaging an army of people to make that happen.
Insights
Ideas are neither actions nor outcomes
Many clients develop ideas to improve pricing practices but struggle to design a roadmap, priority plan or method. This obstructs implementation of pricing improvements and results in a failure of tangible progress.
Some of the complex pricing problems we solve:
- Poorly structured list prices
- Inconsistent customer discounts
- Rebates paid regardless of performance
- Cost-plus mark-up pricing leading to under-pricing
- Missing margin or over-pricing and not generating sales
Insights
Lack of capability to manage pricing leads to further margin risks
When a sales force is not provided with guidance or support in relation to setting and managing prices they often try to create a structure themselves. This leads to confused or conflicting prices that leave your business exposed – however well-intentioned your sales team may be.
Channel conflict can lead to messy and expensive outcomes as distributors and wholesalers clash with major accounts. The net result is often excessive tactical discounting, overly generous contracts and poorly designed trading terms that result in substantial margin leakage.
Insights
The impact of not having an effective pricing strategy is significant.
The business becomes reactive rather than proactive.
Sales teams become frustrated or experience dramatically reduced morale.
A learned pricing helplessness can become part of the culture.
Sales teams begin to believe they are selling a commodity with no pricing power.
The natural conclusion to this scenario is a business in earnings decline or profit freefall.
The situation may continue to spiral out of control and become very difficult to turn around.
It may take years for the company to regain momentum and capture lost market share of customers who have defected to competitors. In many cases, there are substantial changes to management ranks and often a loss of valuable experience.
You need a pricing strategy framework and roadmap
The combination of a robust pricing strategy and a definitive roadmap will a series of quick wins and deliver immediate profits to the bottom line. In addition, you will empower an engaged and focused team to work together to develop a pricing strategy and operational capability with company-wide buy-in and support.
You will realise profit improvement results driven by less discounting and more informed decision making result in more deals at higher margins.
Accelerate your profit improvement program
With pricing capability now a strategic asset instead of a liability, you can undertake more sophisticated pricing initiatives such as price experiments and price optimisation. You can also develop a more advanced approach to customer segmentation that captures more value at the right time from your customers whilst ensuring you remain price competitive.
As the team builds confidence in pricing and selling on value, they transform the culture. A virtuous circle of value-based marketing, selling and negotiation allows your business to make above industry average profits resulting in earnings growth and meeting or exceeding budget.
We believe there are 3 key components to construct a robust pricing strategy:
- Pricing Operations Diagnostic – A numbers and insights [Quant & Qual] led program to identify current capability and determine the right pricing strategy for your business
- Roadmap and action plan workshop
- Training, coaching and ongoing education – A range of professional development programs to empower your team to make more profitable pricing decisions
Pricing Insight delivers a practical and real-world pricing strategy program built from a diagnostic assessment of the current state and future profit goals
Traditional consulting firms rely on a team of consultants to come in and prepare a report and hand it to the Executive management team.
At Pricing Insight we believe the best results come from engaging line and operational staff in development of strategy and its successful execution.
By engaging the broader team, our strategy is set up for success from the outset.
We deliver comprehensive training and development where needed.
The strategy includes a program of quick wins which promotes positive reinforcement, a renewed sense of energy and determination that results in further change.
We advise on any structural changes needed within the organisation and also which tools and resources can assist with pricing management moving forward.
The result is a step-by-step action plan and strategy to increase profit margins and reduce cost pressures.
What can you expect when you engage Pricing Insight
The following pathway is a suggested roadmap for a typical experience with Pricing Insight. Of course, we will customise a map for your business and look at tools that will best suit your needs.
- A discovery phone call with CEO, CFO or key point of contact
- Pricing Insight provide a client briefing document for completion
- A subsequent call to discuss your commercial requirements
- Client commences diagnostic phase for 1.5 – 2 weeks. This involves questionnaires, face to face meetings and gathering of client data.
- Pricing Insight deliver an interim diagnostic report
- Pricing Insight facilitate Pricing Strategy workshop with key staff [1-2 days]
- Pricing Insight publishes a pricing strategy roadmap
- Post workshop discussions to implement roadmap quick wins and long-term initiatives
A success story
Pricing Insight worked with a B2B company supplying a wide range of consumable items.
They were under margin pressure and at risk of losing market share.
We undertook a diagnostic process to understand the issues and identify their opportunities. We found there were a number of outages in terms of lack of clarity around value, lack of documentation of pricing strategy, and weaknesses in their customer agreements.
We also found substantial management misalignment. There were different viewpoints about how to actually go to market which then resulted in a range of inconsistent pricing tactics and strategies. This situation resulted in excessive discounting and further pressure on prices across each of their channels to market.
Using the Pricing Insight diagnostic process, we were able to identify key margin risks and opportunities to drive revenue and margin growth. The diagnostic program generated a series of quick wins. These quick wins included:
- Immediate margin gains and EBIT generation of +$3.0M over 24 months
- Transformation of culture away from cost-plus mindsets to value-based pricing techniques
- Training of sales and category management teams to understand value-based pricing concepts
- Tighter controls around discounting and more sophisticated pricing tactics to combat competitors
- Development of a dedicated pricing management function – role definition and responsibilities
- Generate understanding and alignment to an agreed pricing strategy and roadmap.
How well is the most powerful profit lever in your business being managed?
- How you can transform your revenue model
- How you can drive critical improvements in business culture
- How you can build more profitable sources of revenue growth
Build a tailored blueprint to deliver revenue growth and increased profit margins year on year.
