By Alison Yama
As part of our 10 Year Celebration of Pricing with Confidence, I recently sat down with Reed Holden, founder of Holden Advisors, and asked him some questions about his experiences coaching companies since releasing Pricing with Confidence: 10 Rules to Stop Leaving Money on the Table. Our chat revealed some illuminating insights.
AY:What’s changed in pricing since you wrote Pricing with Confidence 10 years ago?
RH:Companies have gotten much better at discount control, throwing away the idea of falling back on discounts to make sales at all costs. And they’ve gotten better at price analytics using either purchased or internally developed software. Pricing managers now have much better data to work with for setting prices. They’ve also begun to work more closely with salespeople, helping them to justify value and price, to ensure their success with the customer.
Companies continue to put more emphasis on pricing as a discipline and to organize teams around getting smarter when creating products that serve their customers rather than just being cool to make. We’ve also seen a surge in the number of professionals carrying a pricing title. Most of our large global clients all have at least a VP of Pricing, if not a higher-level position, in the organization to drive the pricing function and align the teams to be better pricing stewards.
AY:Do you have a favorite “confidence” success story from a reader?
RH:I was contacted by the GM of a freight company. She wanted to talk about what to do with a customer that was not only a price buyer, whittling away for discounts, but was also brutal in demands for high levels of service. The freight company’s employees were exhausted trying to meet the customer’s demands. After several discussions, we decided the best thing to do would be to fire the customer. She did that at great pain to the business, but after one year, and without having to lay off any people, the company replaced that loss with growth and a better group of customers to deal with. The employees and managers are much happier.
AY:If you could add one new chapter to your book, what would it be?
RH:That’s your toughest question. I probably would want to add two.
First would be a chapter on cross-functional teaming to create better collaboration with salespeople. The focus would be making pricing professionals more successful with customers. When we have a room full of pricing people, product management people, or finance people, we ask, “Why do you think salespeople aren’t more proactive about asking for your help?” There is usually a pause as they realize the answer: salespeople often get a ‘bad grade’ from them instead of the real help they need to close good business when they come forward. Whether it be monetizing the value delivered to the customer, preparing for a negotiation, or asking for help in understanding the customer’s financials, we should be supporting the sales team versus giving them a “grade” on how they are doing.
Cross-functional teaming is more than being right or wrong. It’s about solving complex problems together. I encourage pricing, finance, and product development people to build more empathy for what the salesperson must do to make a sale. Salespeople aren’t off the hook, though. Sales also needs to learn to coach a team of cross-functional players to make the customer more successful. If these functions could make these changes, the collaborative teamwork would improve.
The second chapter would be to make the pricing organization more strategic. Current analytics are very tactical, focusing on price control. To be strategic, pricing leaders need to develop a much better understanding of the real competitive and market dynamics and the value the customer sees from using their products and services.
We need to stop thinking about pricing as an internal, isolated function and instead think of it as a matrixed, collaborative function. Often pricing is not part of the customer-facing team. Pricing managers often work isolated in the corporate office, making decisions about discounts and price points. They lose the ability to get to know the customers better, build trusted relationships with customers as a team, and really develop solutions together to move the organization beyond supplier to trusted advisor.
AY:What is the most common theme you hear from CEOs and GMs about pricing in the last year?
RH: The focus on the market versus internal focus—this is a great shift away from focusing on efficiencies versus market growth. We’ve done several studies with large clients that identify significant opportunities the companies had been missing. Most of these opportunities hinge on solving an unmet need and becoming a trusted advisor, which totally removes competition for any discussion in the negotiation. The senior executives I coach are glad to see that shift to external market development. It allows them to spend leadership energy focusing on moving the organization faster to exploit those opportunities by fostering collaborative support for the commercial teams and ultimately the best customer experience.
If you would like to hear more from Reed or have the opportunity to ask him questions in person, he will be a keynote speaker for the upcoming 29thAnnual Spring Pricing Conference in Chicago May 3-4. He will also attend a town hall style Q&A period as part of the conference.
Why not check out our 10 part video blog series on Pricing with Confidence.