Partner Post: Should I Establish a Pricing or Value Council?

by | Apr 1, 2014 | Quantify Customer Value

I have written a lot about the benefits of having a multi-functional pricing council to support your organization’s pricing process. In fact, the combination of a corporate pricing center of excellence and business unit pricing council is the best organizational design to ensure proper definition and execution of pricing strategies and tactics.

During my career, I was privileged to have established pricing and innovation councils in several companies for which I worked or consulted. In all these instances, I was the champion of the initiatives and the councils were driven by one single element: customer value. All of the firms were extremely focused on creating, measuring, and capturing customer value. Recently, a pricing professional contacted me with two interesting questions: Should our firm establish a pricing council or a value council? If I choose a value council, what would the typical agenda for a value council meeting look like?

 
While I have never established a value council, I know of two companies that use the concept of value councils. One of them had deployed a modified pricing council. As a matter of fact, they had moved away from using the word pricing to focus more heavily on value in order to encourage a new mindset. The second company uses a value council to manage new product development in their Stage-Gate® process. The value council reviews the deliverables at each gate and looks at value proposition, value drivers, value models, value messages and value selling materials.

So pricing or value council? The reality is that you cannot fully separate a pricing council from a value council. Managing pricing progressively requires paying attention to the 3 Cs (cost, competition, and customer value) with a strong emphasis on your customer’s business. If value is important to your company (and if it is already engrained in your organization’s DNA), you can call your council what you want. However, if you are transforming your organization’s mindset from cost-plus or competition-based pricing to customer value, you might need to change the internal vocabulary when you manage your pricing process. In fact, you should consider calling your council a value council to make a point to all relevant stakeholders.

In that case, your value council agenda should have four distinct sections as shown in the figure below.

 

 
Because it is a value council, the time spent on section 2 and 3 must be protected from the traditional KPI review which might go on for a long time and brings less value. I propose that 70% of the meeting agenda should be spent on reviewing value data from the field as well as on discussing strategic value initiatives including the innovation pipeline, value-based pricing activities and other value realization initiatives. The last section of the meeting should consist of specific actions that need to be completed for the next meeting.

 
In the end, there is no right answer to the two questions I was asked. The choice of words in the name of your council is important. Whether you call it value, pricing, or commercial excellence, your council will be a reflection of your organizational culture and of what you are trying to accomplish with your pricing programs. You will have to pay attention to the words you use, the themes you include in your agenda, and who you invite to participate. The secret sauce is in defining your specific value metrics and in selecting your critical value initiatives.

Be bold. Join the value-based revolution!
 


 
About the Author

Dr. Stephan Liozu is a Pricing Evangelist and Thought-Leader as well as the Founder of Value Innoruption Advisors. He specializes in the design of innovative and differentiated business strategies for B2B firms, and the implementation of value-based pricing strategies. His acclaimed Customer Value Modeler (CVM®) certification program trains professionals in value modeling best practices. Stephan is co-author of Innovation in Pricing, A User’s Guide to Value Modeling, and The ROI of Pricing, as well as numerous academic papers. He holds a PhD in Management from The Weatherhead School of Management at Case Western Reserve University where he is an Adjunct Professor and a Visiting Scholar. Stephan sits on the board of Advisors of PPS. Stephan can be reached at sliozu@case.edu.
 

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