Commercial Department: 4 Pricing Skills Your Teams Need To Master Now
The four pricing skills needed for the Commercial Department pricing team.
Are you currently improving pricing in your business due to increasing downward pressure on price and intensifying competition in your industry?
Do you know what pricing team skills drive the best project outcomes and which ones are no longer useful or even harmful to project outcomes?
Would you like to know what your peers are doing better than you in pricing and what your teams need to learn quickly to stay ahead of the competition?
Reskilling your commercial department to solve more complex pricing problems isn’t easy:
As a result of continuing downward pressure on price and commoditisation of even your most premium brands and products; your commercial department has become disconnected from the market; your business and even from their own skills development.
Many executives and teams just don’t know what new pricing skills they should be learning, what existing skills work OR how to adjust to changing demands in your industry.
In fact, the latest research from Gartner shows that:
One in five of your employees don’t have the skills they need for their current role
70% of your staff haven’t mastered the skills they need to do their jobs today – let alone for complicated RRP or price optimisation projects
Our research indicates that there’s huge potential for your HR department to help you and your teams build capability in pricing to solve more complex commercial challenges and deliver in turn more complex business outcomes…
…and in less than 3 months…
So, in this article, I will discuss 4 critical pricing skills sets that have emerged over the past 5 years. These talent insights have been generated from over 10 years of continuous research on pricing teams. All our research is based on a market-driven, predictive approach to skills identification in commercial departments.
I will argue that a run-of-the-mill HR needs analysis of your commercial department doesn’t even begin to address the skill gaps you have in your commercial department now – let alone in the future.
The main contention here is that traditional HR team building activities are struggling to build high-performance pricing and revenue management teams.
What’s more, at Taylor Wells Advisory, we strongly believe that continuing to use and rely on faltering HR methodology to address the growing skill gaps in your commercial department will:
- Interrupt workflows
- Slow down strategy execution
- Disrupt your teams
An HR problem that our research indicates is costing businesses like yours at least 300 basis points of margin loss every single year.
Commercial Department Definition
The commercial department is in charge of the financial and administrative activities of the company. It comprises of billing, revenue collection, procurement, expenditure management and control. In addition to the commercial finance department that produces its financial statements.
What is a Commercial Department in 2019/20?
The role of the commercial department is changing rapidly. Gone are the days when teams in your commercial department could just:
- Pull promotional leadership to drive share
- Rely on overly simplistic cost-plus price setting and ‘mark up to mark down’ tactics to meet margin targets
- Apply a 3% price increase without losing too much volume or customers
- Demand and receive more funding from suppliers to lock in a margin for the following year
Unlike any time before, businesses are now trialling strategies that have a greater risk of failure. Many are implementing price improvement initiatives that are creating a complex set of changes in the pricing team and commercial department.
Markets and business models are changing fast. Hence, pricing skills are evolving. All this change is creating a greater urgency for upskilling your pricing team and preparing your commercial department for the future.
4 Key Skill Sets
New pricing skills and competencies are now in demand — and therefore many of these skills are foreign to staff in your commercial department.
Our research on pricing teams over the past 10 years indicates that the following four skill sets are becoming increasingly important to businesses implementing price improvement or optimisation projects:
1. Strategic price setting
Cost-plus price setting, mark-up to markdown, margin-based price-setting; and match-to-market price setting are not enough to drive profitable revenue growth – in addition to very often lead to substantial margin loss.
Both pricing and category teams need to understand your customers’ current needs and predict future preferences using detailed customer analytics, insights, and data. A breadth of domain price knowledge; scientific rigour and a diversity of analytical thinking is above all essential for strategic price setting.
2. Strategic influencing
Pricing team activities should never be done in a silo; it is not a back-office function that produces endless bubble charts and spreadsheets. Pricing is an integrated; revenue-generating function that is aligned to the market and feeds back insights to stakeholders to drive a vision for change. Their interaction with multiple stakeholders makes effective change management and persuasion skills critical.
3. Price management
Next-generation pricing operations involves redesigning price data infrastructure and operations to power the execution of new pricing tasks; structures, revenue and pricing models, process workflows and price trials.
They don’t merely maintain an overly complex and largely broken pricing system. No, pricing operations teams of the future help you to build an efficient and self-sustaining price management platform which enables responsiveness to customer and market demands, price, cost and efficiency, reliability, and risk mitigation.
4. Price analytics
Manual price reviews will soon be a thing of the past as more simple pricing tasks. And then data entry is automated by AI. Leading companies are using AI-driven price algorithms to optimise prices by product and segment.
Conscious effort and training are needed for pricing teams to develop skills in the areas of price optimisation technology; in addition to profit price elasticity, sensitivity modelling; statistics and data interpretation.
1. The knowledge your teams know about commercial pricing are replaced with new skills and knowledge in 2 to 3 years’ time.
2. Reskilling your commercial department based on a singular viewpoint biased towards the internal needs of the business is not enough to close the skill gaps in your commercial department, therefore, you need a market-driven, predictive approach to skills identification as well.
3. Relying on HR methods that are faltering under the pressure of rapid industry disruption and business change will only hold you and your commercial department back – which means you’ll always be one or even three or four steps behind your competitors.
It’s time to re-invent your HR talent strategy and build a world-class pricing team and commercial department.
The estimated cost of not changing your approach is at least 300 basis points of margin loss.
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