Holden Advisors works with General Managers to improve the commercial performance of their businesses. Throughout the course of our work, we have identified a disconnect between the vision for and the reality of pricing functions within many organizations. Given the dynamics at play in these markets, and how customers are functionally served within them, it is no surprise a clear contradiction has emerged. As a result, we conducted a survey to validate our findings. Over the course of our research, we asked GMs to reflect on the pricing function within their teams and define their wants and needs for the pricing discipline. For the first question, we asked GMs to describe their ideal vision for the pricing function. Then, we asked them to compare and contrast this vision to the current reality. The responses were grouped into the three distinct categories defined below. Here is what we learned:
Strategic Driver: To set strategies and adjust to manage the following business drivers: revenue growth, profitability, and competitive & market intelligence
Aligning Force: To align the value creation strategy, inclusive of investing capital in the most productive uses, to create competitive advantage
Tactical Weapon: To extract a fair price in the market to support the business, react to the commercial strategy, set prices and aid the sales team
The responses from the General Managers surveyed show striking consistency. While there is no doubt to the importance of tactical execution, GMs want and need the pricing function to play a greater role in driving the commercial strategy. As a result, GMs would like to see Pricing drive alignment between Sales and Marketing to steer the Go-to-Market strategy. However, that is not currently taking place. Next, we asked GMs to explore the perceived challenges within their pricing function. Their responses fell into the five categories defined below
History: Tendency to revert back to practices and policies of the past, instead of developing new and innovative approaches
Technology: Enabling tools to drive business decisions rather than partially effective solutions focused on discrete issues
Communication: Maintaining functional awareness and alignment in the ever-matrixed world of corporations
Reactivity: Overt focus on looking backward vs. forward
Internal Capability: Teams ineffective at understanding and capturing value
History, or the status quo, in most companies is difficult to change. Almost equally as difficult, is the task of managing technology to unite teams instead of creating additional fragmentation and/or specialization. However, each of these categories seem more akin to symptoms rather than the underlying cause. Shouldn't the onus fall on the teams themselves to break the status quo and take back control of their outcomes?
Presented another way, we can draw a different conclusion. Is it possible that the pricing function has been set up for failure? Is it a lack of compliance, a need to sell the way we have always sold (inertia), or the internal capability within the pricing function, that perpetuate a historical view to pricing? Are we too reliant on technology that we don’t really understand? Has the pricing function remained insulated from the other parts of the commercial team?
Consider this an open invitation to challenge your perception of the pricing function within your commercial organization.
Taking a close look at the pricing function is only the first step to profit improvement. If you'd like to understand more about how to recapture profits throughout your organization, we'd love to send you our Whitepaper, "The Hidden Cost of Vaporizing Profits"