Thursday, November 15, 2012

The Pains and Gains in Pricing

Guest Post by Stephan Liozu

A recent survey conducted with 557 CEO’s and Business Owners around the world showed they pay little attention to pricing. When asked how they would allocated 100 points of attention between cost cutting, growth programs and pricing initiatives, pricing received an average of 16 points. A vast majority of the time is spend on fixed and variable cost control (54%). Clearly, and even though they realize the power of strategic pricing, top executives do not pay enough attention to it. So what is behind this lack of interest and attention paid to pricing by top executives? I conjecture that this lack of attention primarily comes from the fact that the pricing function does not excel at identifying, measuring and communicating the business pains of poor or non-existent pricing management. The pricing function also has a hard time measuring the gains generated by pricing activities as well as calculating the ROI of pricing activities.

So here are some tips on how to get started and make progress with this difficult exercise.

1) Show the pains

Pricing professionals should spend more time up front identifying and articulating the pains relating to pricing. That can be done by conducting a pricing capability assessment and performing the fundamental pricing analysis: cost-to-serve, waterfall, pricing cloud, etc. These pains then have to packaged in a dramatic fashion with one or two critical numbers that might turn into a story hook. These numbers have then to be communicated inside the marketing and pricing organization without created tensions and rejection.

2) Articulate the gains

Obviously, once the financial and efficiency related pains are identified, measured and articulated, the next step is to evaluate the potential gains of investing in pricing. This remains a very difficult exercise. A focus on short term gains might be necessary to get some initial attention. Like in the Lean Six Sigma methodologies, quick wins are greatly appreciated by top executives as they have a tendency to focus on short term impact. That gives pricers an opportunity to get a foot in the door, to tell their story and to come back for more "face time" later.

3) Create a story

Once pains and gains are identified and somehow measured, the next step is to create a story. That story has to be adapted to the business context, the dynamics of the external environment, the culture of the organization and the management style of the top leaders. Story starts with a strong hook which in this case is the pains: “every year, our organization loses $1 million in profit due to poor pricing.” The hook grabs attention and creates the opportunity to give your one minute non-technical elevator speech. The message is to convince top executives what you can deliver for them in gains to help reduce the pains. That story should be repeated in business meetings, in pricing discussions, and might be translated into goals and objectives for the pricing team. The story has to be crisp, credible, well articulated and somewhat dramatic.

4) Be ready to compete internally

In an organization, you compete for attention. You also compete for human and financial resources. This competition is internal and consists of functions that are in the mainstream and are able to calculate their ROI very well. That includes R&D, operations, innovation, technology and IT for example. For them, calculating ROI and demonstrating payback is expected and second nature. It is therefore very critical for the pricing function to be able to do the same.

5) Keep It Simple Stupid (KISS principle)

Top executives are busy people who have a very short attention span. Therefore you might have to talk to them like as if they were a two-year old child suffering from ADD. It is recommended to keep the message simple, well articulated, and business like. If you manage to get 30 minutes of top executive attention, do not bore them with long analytical explanations, super technical pricing methods, or 30 pages of PowerPoint. Work on a very simple story line using plain terms. That might sound like: "We are currently leaving $2.5 million on the table by not managing our profit leakages and not fully capturing pricing opportunities. With an investment of $150,000, we could get some quick wins, get our company on the path towards pricing excellence while getting a payback for it under 2 years."

I do find it paradoxical that pricing is a very analytically focused function which is not able to calculate and articulate the ROI of programs and activities. This is why Dr. Hinterhuber and I are launching another short survey to explore more information about how the ROI of pricing might be better calculated and communicated. Please support our initiative by taking this short survey.

Here is the link:

An executive summary will be sent to you if you choose to participate. Thanks for the support.

Stephan Liozu ( is the Founder of Value Innoruption Advisors. He specializes in disruptive approaches in strategy, innovation and value management. He is also a PhD candidate in Management at Case Western Reserve University and can be reached at

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What does it take to start your journey to Advanced Analytics? How can facts and numbers shape your pricing insights?

As many of our personal gurus have stated it the past, math will rock your world, and analytics is the new cool. So cool, actually, that the word is now being used and abused and many seem to lose track of what it actually really means. Our cozy pricing world is not immune to this trend, and we have enough material to spend days discussing about what it really means for us.

For example, did you ever stop to think for a minute that reporting hasn’t fundamentally changed since 1869? And there are no typos in this date; often we just keep applying the same old approach on a new medium, leaving untapped the incredible potential sleeping in our databases. Of course, “Advanced” analytics is something different, because it changes the game fundamentally. Or does it? And what type of skills does it require?

And when you start playing with the data you have available, what are the pitfalls to avoid? And with the plethora of data sources, software solutions, magical formulas and cutting edge processes, where should you begin your journey and what can you do with the data?

We started with a simple question: What information do we regularly use to make decisions, and how can we improve the insights by being a bit creative with analytics? The answer was as simple: we all have sales figures, an internet connection, and from time to time we get to do some market research. And with these three entry points, we want to show that it’s already possible to integrate pricing facts in your organization, and rationalize discussions and the decision making process.

After our extensive research and relentless passion for the subject, we came out with enough material to talk about this for a full-day. We selected real examples to illustrate our discussion; for example we will show you that the iphone did not, actually, make people smoke more. We will discuss why you should always build models, yet never trust them blindly, and realize why price elasticity is such a complicated thing to evaluate precisely. We will see how perceptions shape market reality and that failing to convert preferences to sales is NOT always a pricing issue, and why it’s a good idea to look for perception patterns before jumping to pricing actions. Finally, still with a real case to illustrate it, we will also see how you can run simulation and combine industry acumen with market data to set price strategies.

And we also found the best time and venue to share all of this with you! 

We called it  “Improve Your Pricing by Fact-Based Decision Making” and it will be a full-day live workshop on this subject conducted by Daniel Soto Zeevaert and Frank Korf from Deloitte; the workshop will be part of the PPS Annual European & Global Pricing Conference and Workshops to be held in in Amsterdam on 4-6 December 2012. For more information about this workshop and many other pricing training sessions please visit

Tuesday, November 13, 2012

Save the Date:
18-19 April 2013 - Singapore

Please mark your calendar and plan to attend the PPS Inaugural Asia-Pacific Pricing Workshops & Conference in Singapore on 18th – 19th April 2013.

The event will take place at The Fairmont Singapore – Swissôtel The Stamford Hotel.
You can learn the latest pricing strategies and tactics at the largest, most comprehensive pricing event of 2013 in the Asia-Pacific Region!

The full program will be announced within towards the end of January 2013. Please stay tuned for updates.
PPS delivers the best Pricing Training, Networking and Pricing Resources in the World. This conference will give you the necessary tools to deal with the current challenges and improve your company's profitability.
We look forward to seeing you in Singapore!

The Professional Pricing Society

Tuesday, November 6, 2012

Pricing Practitioners Speak! - PPS Conference in Amsterdam 2012

The 8th Annual European & Global Pricing Conference and Workshops
4-6 December 2012 Amsterdam Marriott Hotel
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The top 3 reasons why pricers attend our conferences are:
  1. Networking among peers
  2. World-Class Pricing Training
  3. Learning from other Pricing Practitioners
The list of pricing practitioners in this conference is extensive, but we want you to take a look at this impressive Pricing Practitioner's Track:
Revenue Improvement: Right Data = Right Pricing Decisions with Daniel Golik, Sr. Director of Sales Processes & Tools, DHL Express

Join us in Amsterdam and learn from the best in Pricing from around the World. All in one place, all from the World's most trusted resource in Pricing: The Professional Pricing Society.

We look forward to seeing you there!