How Will Pricing Impact Business in 2012?

by | Dec 31, 2011 | Pricing, Quantify Customer Value

What a wild year – an earthquake and tsunami in Japan, the Arab Spring, economic turmoil in Europe, fiscal uncertainty in the US, and the normal (the new normal) fluctuations in commodities prices. Combine all these with ongoing globalization and increasing competition within and even across industries and you have the recipe for a challenging year. But challenge brings its own opportunities, and for those of us involved in pricing a window is opening for us to have a much larger and a more positive impact on business.

At LeveragePoint we believe that understanding ones customers and providing them with differentiated value is at the heart of business. But this is only sustainable when companies capture part of the value they create back into price. Companies that fail to capture price cannot continue to innovate and will be forced down into a downward spiral of commoditization and price erosion. In most cases, they will not be the low cost provider, and will desperately cut costs, outsource, and stress supply chains as they try to compete. In the end, not even the customer wins, as suppliers offer commoditized, low quality products, that come up short on innovation and even shorter on value.

Pricing expertise, especially value-based pricing, can help to turn this around. Value-based pricing forces one to focus on the customer and consider the competitor when designing offers, setting prices and communicating prices in sales conversations. It provides a common framework for product development, marketing, operations, finance and sales to come together around the value provided to the customer. Widely adopted, it will help whole industries become more differentiated and create wealth for all.

Why will pricing matter to business in 2012? LeveragePoint reached out to its community and asked for their thoughts on 2012.

“Today more and more firms realize that they cannot cut their way to prosperity and that their growth potential have been severely reduced due to the continued recessionary trends. Business are looking at their business models and re-inventing their value propositions in order to generate customer excitement, boost value creation programs, and capture value through value-based pricing. This trend towards value begs the question of who is in charge of value management processes and programs in firms and how they design and implement comprehensive systematic long term value initiatives. There has never been a better time to focus on the topic of business and customer value. Who manages value in your organization?”

Stephan Liozu is President & CEO of Ardex America Inc (www.ardex.com), an innovative and high-performance building-materials company located in Pittsburgh, PA. He is also a PhD candidate in Management at Case Western Reserve University and can be reached at sliozu@case.edu.

Larger impact of pricing:  Many companies have invested in systems, people, process and tools to improve transactional price management over the past decade.  It certainly has an impact and many companies still need to make the investment in better transactional price management.  However, in B2B, I think the next frontier is investing in making pricing/value better connected to the sales force and using value as a tool for sales enablement and improving sale force effectiveness.

    Larger impact on society:  Pricing organizations that are well grounded in value and integrated into the R&D functions of their businesses can help make sure that their companies are making the right R&D choices and investing in new solutions that create real value for customers.  In a way, pricing can help improve the use of precious R&D resources and help create real value for customers.”

Chris Provines is a pricing thought leader and executive at a leading medical devices company.

“I monitor current thought leadership in sales and marketing.  Value selling and value pricing processes are growing in stature in current best practises.  In retail, erosion of brand loyalty is steady due to the market demands and the promotion of house brands. In this case, market leaders who do not address product value through the buying cycle will continue to struggle.  In B2B sales, customers are having to do more with fewer resources. Valued products which are growing in market share assist in top and bottom line growth but also address the demands of speed.  In both these markets, companies that address the value component are stable and growing despite market conditions. Since we predict three to five more years of these conditions, products like Leveragepoint which help companies determine their product value are becoming essential to survival.”

Reg Nordman is Managing Partner, Rocket Builders (www.rocketbuilders.com) and focuses on sales strategy and sales effectiveness.

“Understanding price captured in deals closed get a sharper read on how much value Reps are managing to uncover + monetize thru their sales efforts. Equate this to the time and effort it’s taking Reps to close at those prices and we’re on our way to uncovering the margin-generating capabilities of Reps and the costs (in Sales Reps’ time and effort) it’s taking to achieve those margins. In 2012, pricing offers the potential for an important new take on how we define ‘sales productivity’.

Simply put [prices achieved] + [uncovered value drivers] + [the time and effort invested to achieve these outcomes] = [potential to uncover new best practices in generating margins + profits] = [a new read on sales productivity].”

John Cousineau is President, innovativeinfo.com [makers of Amacus.net]. His focus is informed innovations in B2B sales productivity.

 

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