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PRICING IT RIGHT:
STRATEGY & ANALYTICS
Anticipating the impact pricing decisions have on market demands and advancing in a highly competitive environment
16 - 17 March 2020
Sydney, Australia
marcus evans Asia Pacific
Very high quality concepts and ideas generating a lot of discussion and new thinking.
Red Bull
Great techniques to approach the pricing strategy in a structured manner which will help us improve profit and achieve the overall company objective.
Honda
Very well organised, good topics.
Goodman Fielder
An Interview with Marc Alderding, Director from Act on Value Consulting, Australia
Ahead of the Pricing it Right: Strategy & Analytics training , we spoke to Marc, who is also the owner of Act on Value Consulting, on the impact pricing decisions have on market demands and advancing in a highly competitive environment. Join our 2-days training to drive up revenue and broaden your margin by learning simple tactics and strategies that can be implemented immediately as well as get an in depth understanding of the role big data plays in pricing and how you can manoeuvre that information to forecast customer value and their willingness to pay thereby staying ahead of the competition.
1. Why is understanding customers’ perceived value and the impact on price differentials important?
Pricing differentials are impacted by our own perspective to pricing depending on our role, however more importantly we need to understand from the customer’s view, since the customer’s perception of value will drive their willingness to pay.
Businesses strive to create and deliver value for their customers. It is in this context we say that we deserve to receive price for the value we delivered. We will reinvest a percentage of our resources in R&D in order to sustain our business differentiation. Creating, delivering and communicating value is key to achieve ‘price for value’. Once we are able to price our products for value, we are on our way to delivering sustained profitable growth – allowing us to reinvest in our future business and create value for our shareholders, employees and partners across business cycles – consistent with our company’s vision.
2. What are the different value based pricing methodologies? How they could help?
Value Based pricing is often referred to as some sort of over-arching ‘Value Based Pricing’ structure, however in order to manage pricing effectively we must always consider a range of price drivers and each driver may play a greater or a lesser role in the final output depending on the business situation.
In scope for consideration are the following general price drivers as a guide for managing value based pricing:
3. How does automation help organizations to drive pricing gains?
In the current business environment, slowing growth and reductions in performance buffers requires businesses to look carefully for efficiency gains. Automation in pricing is a popular topic since we know that improved pricing performance is the key driver to profit improvement. If we can automate pricing it may reduce price leakage, improve price governance &/or price guidance, increase data capture and minimise profit inconsistencies, etc. However while there are many automation tools & resources available, businesses must be ready willing and able to implement a pricing automation. Ready to change internal approaches, willing to accept changes to existing systems and past processes and able to adopt change management execution across the entire business. Only when an all-inclusive complete approach is employed will automation be part of a sustained pricing solution.
4. Why should there be an internal alignment between sales and finance for a pricing strategy?
In the C-Suite of every business there are senior execs strategizing on how to accelerate growth, increase market presence, maintain profitability and increase free cash flow. However while this is happening at the senior level, some individual departments may have developed tunnel vision in their attempt to manage their own responsibilities. A good pricing strategy is an essential driver of growth, market presence and profitability, therefore when specifically applied to the goals of finance, sales or any other department, there should be a clear synergy to help achieve the pricing objectives.
5. What is your advise for organizations to achieve target growth with pricing?
As stated above, every business strategy includes details on how to accelerate growth, increase market presence, maintain profitability and increase free cash flow. A good pricing strategy is an essential driver of growth, market presence and profitability. Pricing is the number one lever for improving profitability and allowing the business to reinvest funds for further improvement. Alignment across the entire business, to understand the relationship between value delivered and pricing deserved is crucial to business growth, however also understanding that pricing performance moves both ways and as markets change so should there be adequate pricing adjustment to reflect current perceptions of value in order to maintain market presence and competitive edge.
6. Based on your past experience, how can organizations avoid a price war in the industry?
If you are in a competitive market it is also quite likely you have already experienced price wars or you will in the future, but why? There are many reasons for escalating price wars, however in an attempt to summarise, I would suggest it is the mostly unrealistic expectations of both you and your competitors, a greedy approach to ‘want it all at any cost’.
If we step back and ask do we deserve this business? Have we clearly articulated our value proposition? Have we differentiated ourselves from the competition? etc etc? In my experience, all business will fail to some degree at getting their value messages out clearly to the customer and will come in danger of losing the business to a lesser competitor, at the same time the internal ‘stretch’ business target requires we should NOT lose this deal, so we go hard on price and so the price war begins. (BTW: our competitor also failed to get their value message out clearly and their stretch targets are no less than our own).
Always fully communicate your value proposition, make sure your customer understands how you are differentiated. Even if you have a ‘no frills’ approach to your products, you should know exactly how your product sits against the alternatives and you should get the price deserve and the market share you earned (no more & no less).
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