You and your pricing team have been diligent in using your pricing software to monitor price realization and eliminate outliers, reduce unwarranted discounting, and tighten up your price band. Beware—you may be victim to the Price Complacency Trap—that wonderful space where you are confident that you have instilled price integrity for your core products. In reality, you may be trading single-digit improvements by raising transactions to the regression line for double-digit declines in the entire regression line over time.
In a recently published study, there was a claim that nearly three quarters of executives do not understand Buyer Behavior1. What an interesting statistic. While the area of study around buyer behavior remains a hot topic, there doesn’t seem to be a proportionate amount of interest from those who should seemingly care the most – the C-Suite. Sadly, I wasn’t surprised. Customers are quite possibly the most important aspect of any business, and we simply do not spend enough time or energy understanding what they do and why they do it.
What is the foremost goal of a successful business? To make a profit. Now, this may seem obvious, but in working across industries, it seems to me that many businesses need a reminder. I see this time and time again, clients getting so mired in details and day-to-day fire drills they lose focus. The ultimate objective: stop worrying about revenue and volume, and focus on profit.
Recently, we've seen a number of negotiators get taken to the cleaners in business and politics when they just didn't know how to deal with a bully. You know who they are: they yell and scream at you, pounding the table throughout the process. Think about the current trade negotiations with China—the same thing happens in business all the time.
I recently spoke with a major supplier to semiconductor manufacturers. The semiconductor industry has a handful of global players owning 80% of the market. Predictably, the supplier’s business model is heavily reliant on a few large customers. Because of this reliance, the supplier’s marketing team is well-schooled in measuring value delivered to customers. They knew critical semiconductor KPIs like cost of ownership, yield, performance, and risk. Their value analyses align with improving performance in these key areas. The value toolset is impressive – I had never seen such models and spreadsheets that calculated value so completely.
I have been reflecting on Travis Umpleby’s article, 3 Qualities of a High-Performance Pricing Team, and I wanted to share some observations from my recent client work about teaming and its impact on project success or failure.
Big or small, almost all B2B companies have to sell to large, powerful companies because they believe that the "big win" keeps the plant running or resources at capacity. Those negotiations are often tough and focus on price. “Tough” isn't quite the right word – how about brutal? Those big companies, or gorillas, control a lot of revenue, and like it or not, we have to sell to them. As a result of those brutal negotiations, the oftentimes smaller seller will lose money or barely break even.
However, the promise of the merger can often fall short of the reality.
In our most recent pricing improvement project, we were tasked with finding some low-hanging fruit to execute in 60 days. Our client, a $9B company that has grown as a result of multiple acquisitions is dealing with very complex systems, process, and people integration issues.
During a recent conversation, a pricing manager from a client confessed he felt frustrated with his current state of affairs. He felt the way his company manages pricing is reactive. Exasperated, he cried out, “I want people to stop asking me what we want our prices to be, and start asking me what we want our prices to do!”