Monday, April 9, 2012

Getting Started with Pricing Does Not require $$ Millions!

Guest post by Stephan Liozu

A commonly held belief that emerged from our research journey is that pricing is expensive, requires tremendous resources and is only for large firms. This is also one of the most commonly known pricing myth out there! Au contraire! There are several steps in the pricing maturity model whether you consider the PPS model, the SPMG model or Pricing Solutions model. You have to start at level 1 and move up the maturity levels. And yes at some point getting serious with pricing programs and orientation will require significant investment and sweat equity!

Firms and their managers find many reasons why not to get started with pricing. Typically they relate to lack of time and the cost required to put pricing systems in place. We propose that, to get started, you can follow some of simple steps that can make some quick impact, get the organization started and raise the visibility of pricing within the marketing and finance processes:

  1. Create a pricing council that meets every month just to discuss price trends, competitive pressure, and new-product pricing prior to launch. Invite your marketing, sales, and finance leaders and champion the process. Cash Expense = $0.

  2. Buy several copies of the best pricing book and give it to your key staff and members of the pricing council to read. Then meet to discuss what you learn, what you can quickly adopt in your firm, and what the gaps are. Cash Expense = $500.

  3. Send one or more of your marketing managers to a pricing conference held twice a year by the Professional Pricing Society. There you will learn from the best, meet top pricing professionals and get lots of insights. Cash Expense: $2,000 (PPS proposes some early special deal registration such as buy three get one free).

  4. Take your best costing or financial analyst and give him or her responsibility to apply the basic techniques you will have learned in the book and at the conference. Cash Expense: $0 incremental (already part of your fixed cost).

  5. Join your regional/local Professional Pricing Group. These groups gather pricing and marketing professionals from your region. We meet twice a year, share best practices, and have fun. Cash Expense: $100 in gas and food.

  6. Join all pricing groups on Linked In and leverage the expertise online experts and practitioners. Cash Expense = $0.

  7. Register to free webinars from pricing software firms, consulting firms or register to the PPS Core Pricing Skills online Course. Cash Expense = $400.

  8. Search the web using Google document. There is a gold mine of information out there from PowerPoint presentation to YouTube videos to case studies. Read, read and read more! Cash Expense = $0.

There you have it. You are at Level 1 of the pricing-maturity process. You have spent $3,000 in total to get started. You are already doing much more than that average small- to mid-sized firm out there. You are on the road to your pricing transformation. The critical thing in this beginning step is to keep it simple, to not overwhelm teams with heavy-duty analytics and to pursue some quick wins. Do not yet engage the conversation on pricing orientation and the difficult subject of value-based pricing. Establish basic process and programs that get pricing activities off the ground: pricing cockpit, pricing cloud, waterfall analysis, customer profit analysis, cost to serve analysis, price deviation analysis, etc. Again, keep it simple!

We, at ARDEX Americas, stand between Level 3 and Level 4 of our maturity model. Complexity and cost increase with each level. What you want to do is to find the level that suits you, your industry and your goals. Our 2010 qualitative research with 15 small and medium industrial firms showed that 11 out of 15 firms did not have a pricing function, did not manage pricing formally and applied "bricolage" when dealing with pricing issues. There is still a belief in numerous firms that pricing can be managed by being fragmented, reviewed once and a while, left to the sales force to manage or that market set the prices. A staggering fact!

Be bold! Join the pricing revolution and embark on the journey to pricing excellence! Price = $3,000, Value = Priceless!

Stephan Liozu is President & CEO of Ardex America Inc, an innovative and high-performance building-materials mid-sized company located in Pittsburgh, PA. He is also a PhD candidate in Management at Case Western Reserve University and can be reached at

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1 comment:

Michael Davis said...

Great points! Regarding local pricing groups, is there a list or other collection available somewhere? My initial search has turned up nada (but that may be due to my location). Thanks!