• August 11, 2013

Price with determination, not as underling

Price with determination, not as underling

1024 683 Sodhi Pricing Associates

The fault, dear Brutus, is not in our stars, but in ourselves, that we are underlings, said Julius Caesar in Shakespeare’s unforgettable words. Pricing professionals blame lack of senior management support and visibility for the repetitive fight-or-flight situations in their organizations. In contrast, senior executives stepping in to resolve serious pricing issues complain that their pricing departments are unprepared and always waiting for them to run interference, especially, with the front-line teams. With middle management ranks squeezed substantially by cost cuts, such a perception gap is detrimental to companies and needs to be addressed.

The Simon-Kucher global study and follow-up article, Profits jump when CEOs take an active role in pricing, conveys its message clearly. Undoubtedly, well-thought pricing strategies and top management sponsorship would benefit the pricing function. But pricing teams also need to gain trust by being ready for execution particularly in changing markets. Rather than wandering into a major effort aimed at impressing top management, pricing professionals may consider steps that scope and expand their sphere of influence:

  1. Understand your pricing ecosystem: John, a pricing manager for a global industrial manufacturer, has troubling organizational issues. He wishes that Sales, Product Marketing, IT, and other functional groups would simply get the work done rather than push back constantly. He feels under-appreciated and fears that an ongoing reorganization and ERP system upgrade would sideline him. What should he do?  Despite his tenure and knowledge, John needs to be open to change by understanding new roles-responsibilities and implications of systems upgrades for various stakeholders. By doing so, his position as pricing subject matter expert is secured and possibly expands his influence with new allies. New pricing people looking to adapt in established environments can follow a similar approach.
  2. Understand individuals and motivations: Jennifer is extremely knowledgeable but is frustrated with colleagues who make half-baked decisions without consulting her. Well, she is told, they did not intentionally exclude her but happened to discuss a pricing issue during a ball game or a bar hop where she was unavailable.       Jennifer needs to patiently rein in these people even if it seems easier said than done. Her stamina would be best utilized by targeting key stakeholders with the most influence and highest level of support for her work. Among senior-level managers who seem lukewarm in their support, Jennifer needs a lot of persuasion to bring them on her side whereas those who already favor her need to be managed as power supporters. Over time, other colleagues, whatever their motivations, would be better of collaborating with her.
  3. Give and get support:  Jill lends enthusiastic support to worthy projects and occasionally stays late to help colleagues who are likely to reciprocate in her time of need. Personal relationships, shared objectives, mutual trust and clear intentions are the cornerstones of progress. Otherwise, clever ideas alone seldom guarantee sponsorship from senior management or fellowship among peers.
  4. Map your pricing processes: Joe, a newly promoted pricing manager, was instrumental in turning around an eight-quarter price decline at his company. Using tools, such as, SIPOC or Value Stream Mapping available in Six and Sigma and Lean methodologies, he revealed gaps between objectives and the reality on the ground. Mapping pricing work-flows involving people, processes and systems identify not only pitfalls or opportunities but also shared objectives for internal stakeholders. Correcting for execution delays or negative exchanges with colleagues has benefits — bottom-line improvement and top-level attention.
  5. Set achievable goals:  Strategic goals need to defy limits but the underlying operational milestones should be achievable. Joe’s process maps and early successes paved the way for a price improvement road map.  Early steps for clarifying organizational roles and responsibilities, fixing price leaks and installing process controls translate to profit and efficiency gains quite possibly without incurring new investment. When pricing initiatives gain momentum, senior managers also find it easier to lend their support.

Top-down pricing focus, important as it is, cannot be a prerequisite for price improvement. Pricing-led initiatives can garner support from the broader organization as well as the senior management when it is really needed.

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If you are interested in pricing execution as a topic, consider joining the discussions on the LinkedIn group Pricing Operations.

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