Guest Post: Lessons in Leadership: Price- the Neglected “P”- has Cinderella arrived at the ball?

Guest Post from Mark Maxwell, Director - Marketing, Sales, and Pricing Consulting, Dow Corning

While reportedly the single biggest lever for driving profitability and economic value for most companies, Pricing remains a distant 4th in the race for attention amongst the 4 P’s in Marketing and Business Strategy. Unlike the sexiness of the Promotion P, with its focus on attention grabbing advertising and content marketing; or the strategic challenge of identifying the right channel and distributor alliances within your Place P; or the satisfaction that comes from driving innovation and differentiation with new and improved products and technology in your Product P; the Pricing P with all of its power to transform a company’s bottom line, remains virtually unattended on a daily basis for most companies- settling instead for limited time and attention during annual planning reviews or event-based pricing moves.

I believe many companies can relate to a recent quote attributed to Jeff Immelt- Chairman and CEO of General Electric- when he said “Not long ago, a guy here (at GE) did an analysis of our pricing in appliances and found out that about $5 billion of it is discretionary. Given all the decisions that sales reps can make on their own, that's how much is in play. We would never allow something like that on the cost side. When it comes to the prices we pay (our costs), we study them, we map them, we work on them. But with the prices we charge, we're too sloppy.” Sloppy, undisciplined, inconsistent, uncontrolled- does this approach to pricing sound familiar?

 If so, you are not alone- and this is perhaps a paradigm shift that many organizations need to consider- as they look at the balance of time, effort, and money spent on improving their pricing practices versus costs. Is the army of six sigma black belts, cost accountants, and economic evaluators focused on your costs, far exceeding the number of corporate pricing experts and specialists? And while cost management is an important aspect of managing a company’s profitability and value- as stated earlier, pricing is the highest leverage item a company has for impacting profitability.

And said another way by Warren Buffett- “The single most important decision in evaluating a business is pricing power. If you’ve got the power to raise prices without losing business to a competitor, you’ve got a very good business. And if you have to have a prayer session before raising the price by 10 percent, then you’ve got a terrible business.”

So why is it that Pricing remains very analogous to the story book character, Cinderella, whose beauty and true heart were unrecognized when hidden and overshadowed by her evil stepmother and stepsisters- but who unexpectedly achieves recognition and acclaim after a long period of obscurity and neglect after putting on the glass slipper? It’s not that the Product, Place, and Promotion P’s are by any means evil- they are absolutely critical in your strategy. However, when focused on at the expense of pricing, they can lead you down a very challenging path. But in the end, as the story goes- who ultimately ends up with the handsome prince? It’s Cinderella of course- and who else would you like leading the renewal of your pricing activities?

The time is now to take this journey to the next level- and there are great professional resources available to help you in this quest for improved price and profitability. As an example:

• The Professional Pricing Society- the world's only association dedicated to pricing management, pricing training and pricing excellence. With semi-annual meetings and a host of other resources; they are an organization solely focused on the practice of pricing. 
• Pricing Consultants- such as Joanne Smith; Simon Kucher and Partners; Tim Smith- Wiglaf Pricing; PWC; and many others. True experts that have the experience to help challenge and shape your future pricing direction. 
• Pricing Software Companies- PROS; Vendavo; Vistaar; others. Companies that have brought Pricing Science to the forefront of our strategic thinking- and who offer tools and applications to help your pricing professionals become efficient and effective with this critical element of their marketing mix. 

So why not pricing? What will be the thing that draws it out of obscurity and to the forefront of your strategic thinking and 4 P’s? What will be the “glass slipper” that unveils its beauty? Because in the end, what is sexier and more elegant than growing profits and sustaining growth?

View Mark's LinkedIn Profile Here

Capital Pricing Consultants L.L.C. Announcement

August 21st, 2015 - Exciting news from PPS Board of Advisors Member Lydia DiLiello

Lydia Di Liello announces the opening of Capital Pricing Consultants L.L.C.

Lydia Di Liello is the founder and principal of Capital Pricing Consultants L.L.C. a Revenue Management consultancy dedicated to improving profitability for its clients. She brings more than 22 years of global revenue management, pricing expertise and business leadership experience to her clients.

Spending her corporate career in business to business after earning an MBA on scholarship from The Youngstown State University, she achieves sustained double digit increases to profitability for her clients through both strategic and tactical measures.

Lydia brings her experience working with global Fortune 500 companies as well as mid size privately held firms achieving dramatic impact to bottom line results through pricing strategy development, change management, business strategy and raw material cost capture.

Lydia is a member of the Board of Advisors for the Professional Pricing Society the only global organization devoted to the training and education of pricing professionals. She presents regularly at their conferences and is a frequent contributor to their newsletter.

To learn more about Lydia and her newly launched website go to www.lydiadiliello.com A presentation on How to Successfully Implement Pricing Software: Creating a Revenue Generating Machine is available for download at www.capitalpricingconsultants.com.

Diana Zuzek, Former Chief Pricing Officer at 3M launches Beanstalk Revenue Management

Diana Zuzek has announced the launch of Beanstalk Revenue Management. The company will focus on helping businesses prosper and thrive through the development of detailed marketing and pricing strategies.

"Many businesses are facing deflating revenues, thinning margins, volume losses, and stiffer competition," explained Zuzek. "We identify the root cause of the symptoms our clients are facing, and then build and execute a plan to maximize profits."

Having successfully tackled marketing and pricing related challenges across a diverse range of geographies and industries, the experts at Beanstalk Revenue Management offer rich expertise and insight into the challenges that companies encounter. Real-world business experience enables the team to tailor solutions to the practical realities that businesses face.   "We are eager to help other companies deliver profitable results through pragmatic, actionable marketing and pricing strategies," said Zuzek. "In a global economy, the size of your beanstalk (or profit) does matter. Whether you are a million-dollar company or a multi-billion dollar company, gaining insight into marketing performance and price leakage is critical to survive in an ever-changing competitive market."

The team has a reputable track record of uncovering profit opportunities, defining solid strategies, and developing the infrastructure central to ensuring sustainable growth. "Our extensive expertise," explained Zuzek, "has been developed across the globe in a diverse range of industries, including industrial, safety, healthcare, transportation, consumer, energy, and electronics."

Expanding on her organization's capabilities, Zuzek said, "With more than 25 years of leadership experience in sales, marketing, key account management, supply chain, business operations, and infrastructure, we bring a rounded, results-oriented approach to the profit challenges we help our clients overcome."

About Beanstalk Revenue Management

Headquartered in Minnesota’s Twin Cities, Beanstalk Revenue Management leads businesses through a framework to develop, strengthen, and deliver tailored marketing strategies. The components include:

• Business strategies and objectives
• Transactional price optimization
• Customer value and key buying drivers
• Product and customer mix management
• Price strategy definition
• Competitive factors and trends
• Business partner engagement
• Infrastructure and governance

With a rich understanding of these components, Beanstalk Revenue Management works alongside clients to identify profit opportunity and develop an underlying infrastructure to sustain results for years to come.

Giving Back

At Beanstalk Revenue Management, we're truly passionate about helping others. This passion extends beyond typical business environments. We are excited to donate a portion of our profits and time to local non-profits serving people in need in our city and around the world.

Contact

For more information, visit www.beanstalkrm.com, email contact@beanstalkrm.com, or call 651-356-8148.

Pricing and Change Management

Guest Post from Stephan Liozu, PhD, CPP

"Change is the only constant" - Heraclitus

The world is changing. Business is changing at the speed of light. Business complexity increases, environmental dynamics evolve, and competitive strategies are continuously reshaped. One thing is for sure: change is the only constant! And the pace of change is accelerating. The field of pricing is not immune to change. New pricing technologies emerge every year and disrupt the way we price products and services (price optimization, dynamic pricing, scientific segmentation, CPQ, multi-channel pricing). Pricing and competitive pressure have definitely intensified since 2009. Pricing professionals are asked to do more with less and increase their level of productivity by quickly adopting some of the latest technologies, methods, strategies available to them. More and more, pricing professionals have to act as change agents to deploy these pricing innovations and to collaborate with project managers to ensure deployment success. In order to do this, they have to become aware of and proficient in change management techniques as well as understand the importance of change leadership skills.

Change management represent the engine of change. It is composed of techniques, methods, and processes that are used to deploy new pricing resources or to conduct new pricing activities in an organization. Change management deals with the people side of change and ensures that things get done within defined process parameters, agreed upon budgets, and the required timeline. Change leadership is the fuel for this change engine. You can have the best change process you want, it is change leadership intensity that will make this engine run at the required speed. That includes drive, conviction, and passion so that the organization understand why the change needs to be done. Not many organizations have a dedicated change management team. When it is the case, pricing professionals have to take over the change management responsibilities. The upcoming workshop with PPS in Dallas was designed to equip them with the necessary skills.

Here are five more considerations that are essential for organizational change and which will be discussed during the upcoming workshop:

1. Change needs to be intentional and focused: Change management cannot be reactive. It has to be intentionally design and managed across the organization. Change requires sense of urgency for doing things differently. It starts with an organizational realization that some pricing issues need to be fixed. It is easier to do when the organization is facing adversity or serious pricing problems. It is less easy to do when an organization is successful. Why should I change when we are doing great? How many times have you heard that?
2. The vision is critical for success: Vision is critical to drive change. The vision rallies people around a goal and an outcome. This is may be one of the most neglected component of change initiatives. Yet all change management methodologies include a shared vision in their change process. Not many firms have a declared pricing vision. In fact, a 2012 survey we conducted with 557 CEO’s showed that only 39% of them had such a pricing vision.
3. Change management is not project management: These are two different disciplines. They are often mixed up. You might hear “yes we do change management as part of our project” when in fact, business professionals focus solely on the technical aspect of their projects. Project management deals with the technical side of moving from current state to future state. Change management focuses on the people side of that transition. They need equal attention and work hand-in-hand in project teams.
4. Pay attention to all relevant stakeholders: A big misconception is that pricing changes only concern pricing teams and sales organizations. Organizational change deals with everyone who touches pricing (finance, supply chain, customer service, etc.) and who interacts with customers (technical support, drivers, sales, etc.). That requires different organizational road mapping exercises: from stakeholder analysis, to what’s in it for me analysis, to holistic training plans.
5. Change requires leadership support: Our survey indicates that change without capable champions and top leadership support is difficult. Resistance to change might come from the top as well. The role of the top leaders are to identify and make resources available to change agents. They remove roadblocks and tackle bottlenecks.

Pricing projects are hard to implement. Pricing transformations are even harder. If your organization is stuck in time or unable to embrace large organizational pricing projects, you have to think differently and bring in change experts. Change management is a science and there are amazing training programs out there. In 2013, I became a Prosci® Certified Change Manager and it opened my eyes on how rich the change management and change leadership fields are. The upcoming workshop was designed to include all these considerations as well as insights from these six change management methodologies. Join us to learn about how change management can improve the chances of success with your pricing projects.

Stephan Liozu (www.stephanliozu.com) is the Founder of Value Innoruption Advisors and specializes in disruptive approaches in innovation, pricing and value management. He earned his PhD in Management from Case Western Reserve University and can be reached at sliozu@case.edu.

Why Security Analysts Often Whiff on the Pricing Issue

Guest Post by Per Sjofors, CEO Stratinis USA (Per@stratinis.com)

It was a key moment in the third quarter earnings call for Netflix when Management was blaming a previous monthly price increase from $7.99 to $8.99 for disappointing new subscriber growth. The lackluster results almost overnight knocked 24% off the market cap of the high flying video streaming company. Fast forward three months and Netflix stock was soaring in the wake of strong new subscriber growth and Management made the unusual confession that they may have been wrong to have blamed the price increase in the first place.

Few stocks over the past year have garnered as much public or analyst attention as the mercurial Netflix and few have shed so much light on the black hole of Management called “pricing”. Netflix Management made a number of critical pricing decisions in the Spring of 2014 including maintaining the existing $7.99 monthly rate for existing subscribers for two years, while increasing the new subscriber rate to $8.99.

These moves had tremendous bottom line implications for the company. On what basis for instance did Management decide to hold the line on existing subscriber pricing when a dollar increase could have potentially meant a doubling of net profit. And why did Management decide on the $8.99 price for new subscribers versus a threshhold price point such as $9.99. And what were the reasons for Management believing pricing was to the blame for the disappointing third quarter results.

One would think that given all the analysts covering this stock at least one would have questioned Netflix Management on these critical decisions or at least on whether or not they were now being guided by new data driven pricing optimization software that takes much of the guess work out of pricing decisions.

Not only were there no questions but a review of hundreds of earning call transcripts of public firms show that it’s very rare for Management to be questioned about pricing decisions at all. What is the reason for this collective negligence on behalf of US security analysts especially given that pricing is one of three key ways to boost profitability along with reducing expenses and selling additional units.

Much of the blame must be put at the door of our leading business schools. How many really do a good job of teaching pricing strategy other than it is one of the four Ps of marketing. Ask any number of MBA grads from leading schools over the past thirty years on how much emphasis was placed on the topic of pricing and you are very likely as to come up with the same answer as we did: “Not Much”.

How can this be? The truth is most American businesses, even highly respected firms like Procter & Gamble, tend to gloss over the topic pricing with at most, a staid “good, better, best” approach. And those select so called “Academy Corporations” like P&G are training grounds for so many US corporate leaders and thus have a huge influence on US business practices and grad school curriculum.

The truth is the road to bottom line success for most companies in the US where there is a large, homogeneous, and growing home market has historically been either via unit growth or cost cutting. Determining optimal price points for various customer segments is either considered too hard to truly determine causal impact or too culturally challenging in the face of alpha dog sales departments or constricting overly conservative corporate lawyers.

May we suggest then that the path to fame and success for newly minted security analysts begin with understanding the capabilities of new pricing software tools and challenging Management on the rationale for their pricing edicts. The days of flying blind on pricing need to be in the rear view mirror giving the stakes in these times of modest growth and lean corporations. In the end, the upside can be a grand slam home run for American business as a whole.

Oil prices are falling. How about a price increase?

Guest Author:
Susan Lee, Global Pricing Strategy Specialist

Oil prices have dropped more than 50% since last year and global commodity prices are at their lowest in the last few years. While many are predicting oil prices to rebound from the below $50/barrel level, “rising costs” can no longer be the only excuse for price increases.

To drive profit growth… yes, you can cut costs, sell to more people and get them to buy more, but capturing value through price will always be one of the most powerful profit drivers. For an established brand, price increases are inevitable.

Companies around the world want to raise prices, but most have not succeeded. On average, only about one-third of all planned price increases actually get implemented. Companies raise prices by only 1.9 percent for every 5 percent they attempt. In fact, we are seeing “pricing power” – the ability to achieve higher prices – plunging to its lowest level in 5 years. These are the results of Simon-Kucher’s Global Pricing Study 2014.

This struggle is especially acute for FMCG brands in mature markets like the U.S. where retailers are powerful and competitive pressure comes from both deep-pocket national brands and low-cost private labels.

While failure to raise prices can hurt short-term profit, it also has a big impact on long-term growth. Time and time again, stagnant profits leave companies without sufficient resources to finance future innovations.

The good news is you can increase your chances of success if you…

1.    Incorporate external indicators
Start with assessing consumer perception of each key product group’s relative value-price relationship. We recommend assessing four categories of indicators: consumer-, competition-, market- and margin-oriented. Companies that struggle, focus only on internal financial metrics and ignore the external dynamics.

2.    Take advantage of your portfolio to create a soft landing

Chances are you have multiple brands, sub-brands and pack-sizes in your portfolio. A uniform price increase is almost never the optimal strategy. By understanding the consumer’s volume migration pattern, you can vary the level of price increase so that part of your portfolio is relatively more attractive to catch the volume leakage before it goes to your competition.

3.    Focus on the category growth story  

As much as you can avoid it, a price increase should not be the headline. Time your price move with good news, for example, noticeable renovations in products or packaging or truly breakthrough innovations. Position the retailer story to be about driving category growth and make the price increase just one of the many bullet points in the broad commercial program.

Honestly, folks in the FMCG world already know this is the right thing to do (Unilever and Procter & Gamble are stated as examples by a recent WSJ article ), but not everyone does it. Why? Doing this requires planning the price increase as a proactive move and many price increases are reactive to a cost change. A wise industry veteran once told me, “If you use cost increases to argue for a price increase, be prepared to bring the price down when commodity prices go back down.”

X-factor: Keep calm and carry on: In addition to incorporating the 3 success factors above, a well-planned price increase roadmap prepares for a short-term volume dip. Among consumers who notice the price change (most won’t), they may take a few shopping trips to get adjusted to the new normal. Leaders who can stomach the dips will enjoy a much greater chance of getting the price increase to stick.

To read more on the insights from our 2014 Global Pricing Study, click here to get your free copy of our eBook, “Profitable Innovation.” Don’t worry, it’s written for busy business people who want to learn something new during a 3-hr flight.

About the Global Pricing Study 2014: Approximately 1,600 participants, from companies of all industries and over 40 countries, took part in an online study conducted by Simon-Kucher & Partners, in collaboration with the independent Professional Pricing Society (PPS).

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