Ask any salesperson what their most valuable asset is, and they will answer instantly—my time. Great sales people are really stingy about this scarce asset, always asking “Is this the best use of my time?” before they engage with a prospect, set up a sales call, or respond to an RFP. In sales terms, they qualify the opportunity before they invest their time. Right on!
Pricers should take this lesson from sales to heart and begin to qualify how they spend their time as well. Since good pricing and solid value messaging underpins the entire sales process, pricers’ time has a huge leverage. How should pricers qualify how they spend their time? Focus your time on pricing activities that yield:
- Analytics that puts profit before topline revenue. Price plots are the bread-and-butter of pricing, but adding gross margin dollar plots may reveal that your big “strategic” accounts are eating into your profits by having your technical and customer service teams on speed dial and demanding annual price concessions to recognize their “loyalty.” Build a price waterfall by service offering to see profit leakage from underpriced, or worse un-priced, special services. Add a fee, and you may be surprised how many clients suddenly don’t “need” that special delivery or packaging.
- Outside-in analysis that wins and retains profitable customers. Pricing should be leading the way in identifying the customers and “jobs to be done” where your products and services are uniquely suited to drive profit—for both the customer and you. Price to capture a fair share of the value and provide flanking products, those devoid of high-value feature/services, for customers whose business wouldn’t benefit or where procurement is playing poker, pretending these differentiators don’t matter.
- Tools that enable/force sales to make price-value trade-offs. Provide sales with an array of Give-Gets that enable sales to tune the value delivered to the price being paid. Pre-define and attach a shadow price to these Give-Gets so sales can decide how to add or subtract these value nuggets to align to price. And don’t forget those “give-away” services that your strategic accounts expect the sales person to throw in “to sweeten the deal.”
These big three put pricing back where it should be—setting prices that achieve profitable growth for companies. Automate as much of the transactional analysis as you can and focus on the big picture—achieving your company’s business goals. Pricing, paired with sales, can set, execute, and defend prices that are fair and communicated in financial value terms that resonate with customers. Not all customers will want value, but for those that do, these three principals will enable pricers to be the profit-generating group.