How to Build a Customer-Focused Culture Strategy 🏰
As a CEO or executive competing to win in an industry weighed down by margin pressure, you’ll probably want to transition the business from cost-plus to value-based pricing very soon. You may also have a fair bit of doubt running through your mind about transforming your culture to a customer-focused culture strategy.
- How will you integrate pricing within the business?
- Will you need a dedicated pricing team, or can you align the resources you have already?
- How will customers and stakeholders react?
- Do people understand why they need to change?
In this article, we will discuss some of the barriers to better pricing and offer five ways to create a customer-focused culture strategy to deliver financial benefits not just for the company, but for your customers, your team, and you.
Table of Contents:
How to Build a Customer-Focused Culture Strategy
What is a customer-focused culture strategy?
A culture without values has no meaning. Where there’s no meaning; there’s no customer or employee engagement.
A customer-focused culture strategy is a new system of laws, principles (of which value-based pricing is vital), rules, customs and norms that bind your people to your customers in a meaningful and harmonious way. Moreover, a customer-focused culture strategy not only encourages your staff to value their customer’s viewpoints about price, value, product, and brand. But it also stabilises employee engagement by providing people with a shared code.
In addition, a customer-focused culture strategy is an alternative system of values, practice, and beliefs. One that motivates and drives your people to adopt new ways of thinking. And working to serve and add value to your customers.
When you start changing how you price, you are challenging your entire workforce to think differently. About how they relate to customer-centric and view the nature of work, their customers and each other. Additionally, you’re also asking them to change their values, which is by no means something easy to do.
Your good people will try and leverage new thinking and pricing with a customer-focused culture strategy. And look outward to the market for validation.
The not so good will be reluctant to let go of what they know and want to maintain the status quo. And find customer feedback an affront to their traditional sensibilities (i.e., cost, operations, and efficiency).
A cost-plus culture conversely is a shared belief system that is too difficult to un-learn. But also dangerous to deny and avoid. Cost-plus pricing endangers your connection to your customers because it overcharges some customers and undercharges others. The customer wants you to offer them highly personalised experiences and value. Not to feel ripped off by a crude pricing system.
The difficulty involved with creating a customer-focused culture strategy
After reviewing the experiences of twenty Australian businesses, embedding a customer-centric culture is a problematic endeavour. Most companies underestimate the enormous impact changing pricing has on company culture. They focus more on installing expensive price software solutions and strategy, rather than skills-building and improving communication.
Many employees find the transition from cost-plus to value-based just as confusing as your customers. For employees, I have learned that there’s nothing more important than the maintenance of a shared belief system. If it’s threatened, the great ship of state rocks.
People do not just embrace a customer-centric culture with open arms just because you told them to do so. Your people and your customer will feel confused and anxious when they hear you’re changing the way you price. They will be wondering why you need to do this now when before this point in time, you didn’t give much thought to pricing. They may also be worried that they don’t have the right level of pricing skills and knowledge to run more sophisticated price models, systems, and processes – and rightly so because they may not.
In the absence of a system of value to define and educate your workforce on what it means to contribute and work within a customer-centric culture, people cannot act. You’ll initially be surprised by the size of the skills gaps in your teams. You may think a bit of training will help them achieve new goals. However, broad-based training does not work – an expensive waste of time. Pricing expertise takes years to accumulate; you cannot instil values and in-depth learning in an afternoon workshop.
Transforming from cost-plus to customer-focused culture strategy
The transformation to a customer-centric culture often takes business years to accomplish. Many executives complain it feels like a long, hard slog. Nearly all of them say they would have done it differently. However, many CEOs have told me that it’s almost impossible to follow a strategy without the right capability and culture in place.
Asking how to improve pricing skills and knowledge is riddled with false perception and blind spots. Many managers and executives like only to tell the CEO good news. Also, they will say that they can cope with the new demands of a customer-centric culture. And have the capability to adapt to changing working practices.
After carefully examining 20 major pricing transformations, we find what people say they can do and what they can really do are two very different things. When you ask a manager, “Can you perform new pricing roles and duties? They almost always say they can. A mixture of wishful thinking, barefaced confidence and their survival instinct kicking in. The threat of losing their jobs if they admit their mistake or their status creates fear.
The hard reality is that 75% of all price improvement initiative and transformations are abandoned or struggle to achieve anticipated results. Your people want to contribute positively to building a customer-centric culture. Many do not understand why you are changing the way you price. Others may not have the know-how or pricing skills to get the business to the next level – including what training and skills building is required.
Customers aren’t the only ones who get confused when the message to embrace a customer-centric culture is unclear. Your people must have the meaning inherent in a customer-centric culture or the horror of existence rapidly becomes paramount. No value, no meaning.
How to create a customer-focused culture strategy
As a leader, you know why the business needs to change. However, do your people or customers understand what a customer-centric culture means for them? Let’s say your people’s previous code of practice and beliefs was inward-focused. We’ll also assume asking for discounts is something your customer knew to do. Is it fair to expect your staff or customer to accept or even understand what a customer-focused culture strategy is?
At this point, you may be thinking, I’ve got a great team. With a bit of training, they’ll come up to speed in no time. Unfortunately, culture does not work like this.
It is a truism of biology that evolution is conservative. Existing production is to be built upon when something transforms. Adding new features and altering old ones is fine, but most things remain the same. Nature laid down the cornerstones for fundamental transformation long ago.
But it is possible to hack our hard wiring and get the dollar value from our past investment in pricing strategy, team resources, and software? Here’s how:
- Point the corporate story to the customer. Employees will experience cognitive dissonance and work to align the actions of the company with the core values they’re supposed to reflect when there is something bigger than themselves to believe in.
- Train, support, hire, and, if necessary, use discipline to reinforce the importance of the customer. The right people and energetic guidance are essential to building and maintaining a customer-centric culture. This needs to be nurtured in the same caring way as a teenager.
- Make your values visible. The brand’s entire core beliefs, plus shared basics of customer and employee interactions, should be easy to understand and laid out in various visuals.
- Show your commitment to these values. People copy people. Therefore, make sure to offer regular constructive feedback. Moreover, empower people to collaborate closely with customers. Give them the right tools and targeted training to fill skills gaps quickly.
- Include stakeholders from the broader business. Your people want to be part of an organisation with a sense of purpose. Expecting executive to drive price improvement lacks accountability. Remember, executives, are not the custodians of vision. They set a direction and goals.
- It’s the people on the frontline. Your sales teams and customer services centre has the information you need. They create a customer-centric culture that resonates with your workforce and customer base. Additionally, culture is not a top-down directive. It’s a way of life, and we are all responsible for its evolution – good and bad.
Sometimes, proactive intervention is required to influence customer-centric company culture and set people in the right direction, especially when the business strategy is heading toward unfamiliar territory or transitioning from something old to something new.
Transitioning from cost-plus to value-based is not as clear-cut as a consultant make out. It’s not as simple as establishing a pricing team and installing a simple command and financial control structure to govern pricing. There’s a lot to consider and lots to lose if your people and customers reject your new pricing offers.
Leveraging pricing to create a customer-centric company culture is a great way to contextualise value for your teams. Balancing customer needs and business with the requirements of staff is an alchemy that is profitable and healing.
As a CEO, you need to know that a pricing change has an enormous impact on your company culture. Not focusing on your people at the beginning of the price improvement program will lead to a long and painful change process to a customer-focused culture strategy.
People will tell you everything is fine. However, you’ll realise late in the process that their feedback was less than reliable. This inconsistency will become apparent when resistance overruns your mission to create a customer-focused culture strategy.
What’s Stopping Pricing Teams From Driving Customer Focus In New Business Culture?
Business culture: When CEOs decide to build, grow or change their internal pricing capability, very often they will ask whether it will be difficult to find talented pricing leaders suitable for their business.
- What’s the market like right now for good pricing leaders in Melbourne?
- Do you know of any good pricing leaders that are looking for a new opportunity?
- Would they be interested in joining our business culture?
These are the wrong questions to ask:
Yes, we know remarkable pricing leaders. Yes, they have got results in the past and are very likely to generate additional margin for your business too.
But, the real question to ask is can that pricing leader thrive in the business culture you have?
Understanding your talent management system is a much strong predictor of profitability and team performance than individual pricing capability.
It can be a challenge explaining to CEOs that a business’s talent management system, as opposed to an individual’s pricing capability, is often the real reason why great pricing leaders and their teams fail to deliver the results expected from them.
Sometimes the ‘who’ part of the team performance/effectiveness equation become less important than the talent management system within which an individual and team operate.
Taylor Wells believes that CEOs often place too much emphasis on finding talented pricing leaders and not enough emphasis on the talent management system that will keep and nurture high-performance pricing leaders and teams.
A talent management system has an enormous influence on individual and team behaviour and performance – and a lot of this influence is on a deep subconscious level.
Putting great people together and hoping it will work, sometimes works and sometimes doesn’t, and most of the time businesses don’t know why.
In this article, we will explain what a talent management system is, and discuss a real-life case study example of how a talent management system can influence a pricing team’s performance and business culture.
What is a talent management system – building a winning business culture?
A talent management system describes the strategies, structures and processes that an organisation leverages to identify, develop and reward talented people. Also, it is the driving force to building a high-performance business culture.
It is evident in the HR framework you have in place. It is your development, training and mentor programmes that enable pricing teams to engage with relevant and targeted learning and development opportunities through clearly structured appraisal and personal development plans and reviews.
Talent management is demonstrable in how you recruit, select and evaluate pricing and commercial talent – whether or not you provide a stimulating and engaging recruitment experience that measures price mastery or whether you offer a generic, fairly transactional recruitment experience that offers very little insight into how someone really behaves at work and thinks through pricing problems.
Talent management is central to:
- identifying high potential individuals
- mitigating the risks of good people leaving the organisation
- avoiding bad hires from entering the organisation.
A businesses’ talent management system provides formal strategies policies, procedures. However, there is also a more organic side to a business’s talent management system that businesses tend to overlook or avoid.
These are cultural and team norms that exist as a result of the more formal talent management structures you installed in the business. Norms are the traditions, behavioural standards, and often unwritten rules that govern how individuals and teams function within the parameters of more formalised talent management structures.
A talent management system consequently consists of both formal and informal structures; a network of human interactions, emotions and team norms that translate and morph formal talent management over time.
Everyone from the CEO to the sales support coordinator develops collective norms about what’s considered appropriate behaviour.
For example, when a pricing team comes to an unspoken consensus that avoiding disagreements with sales about excessive discounting is more valuable than debate, that’s a norm asserting itself in a large talent management system.
If team norms perpetuate low-performance standards and limited teamwork, then a task-focused workforce will begin to form over time.
Very often your talent management system condition new and existing pricing teams to work in certain ways, and they inadvertently perpetuate the status quo.
The team norms alive in your business culture are the outcome of your talent management system. They are evidence and proof of whether or not your: competency frameworks, job descriptions, KPIs, recruitment and on-boarding process, KPIs and performance management are delivering high-performance teams and culture or not.
Outdated talent management lowers performance standards
A talent management system inadvertently identifies and omits certain profiles of people as “talented” regardless of the diversity agenda you have published on your job descriptions.
It is common to find businesses defining “talent” as someone that fit in well with the pricing team or business culture. The opposite is also true: It is common for businesses to label bad hires as individuals that do not align with organisational and pricing team norms.
Real diversity in the business culture is interwoven within your talent management system.
Even the best pricing leaders with a long track record of successes can underperform when the talent management system is perpetuating bad team habits.
Everyone acts differently in groups. Even pricing teams used to facing resistance are reluctant to go against their team or peers. It is incredibly difficult to challenge the status quo without support.
New hires also know that they are in a vulnerable position when they start a new job. Their 6 months probation period is top of mind. Many do not want to rock the boat and lose their jobs. Consequently, many new team members end up deferring to latent team norms – good and bad.
We find most pricing team members (new and existing) tend to adapt their behaviour and thinking in some way to align themselves with the business’s talent management system. Often this adaption is at a subconscious level.
The problem with deferring to the group is that it very often exacerbates conformity and fear of non-conformity – the very problem a good CEO is trying to solve when they set up a pricing team.
Good teams fail in toxic cultures
Ultimately, the written and unwritten rules within your talent management system will impact whether your pricing leaders and the team will succeed or fail.
There are specific norms in every talent management system and they vary by organisation. One thing, however, remains true when teams work well together and that is, teams that succeed always feel a sense of psychological safety.
Talented pricing leaders reach high performance when their talent management system encourages and rewards competence, teamwork and genuine leadership. Good talent management systems align an individual’s technical skills, soft skills and underlying values and motivations and those of the organisation (including the team they are joining).
An effective talent management system ensures all three elements are congruent so that people collectively develop high-performance norms over time.
High-performance norms reward teams that:
- tap into each other’s diverse skills and knowledge,
- trust each other with information;
- have honest discussions without fear of retribution;
- admit their mistakes and concerns.
High-performance teams and culture are what you get after you’ve put new talent management strategies, structures and processes in place to tackle disengaged, under-skilled and depressed workers.
Your talent management system evolves as you do that important work initially.
Listed below are a few statements taken from a talent review we conducted for a pricing management function in a multinational industrial engineering business. It describes latent team norms operating within their talent management system:
- I’ve heard he is not very popular with sales and they now don’t’ come to the pricing team for help”
- “I’m an introvert… it’s rude to question someone else about their methods and area of responsibility… We have really smart people on the team ”
- “He was smart but lacked people management skills.”
- She was destructive and kept the information to herself”
- “He seems like a resister”
- “She is a nice person”
- “He lacks commitment”
- “____ was very impressed by her because has experience of our industry ”
- “People from outside our industry take too long to understand the business culture.”
As a result of this talent review, the business realised that they needed high achievers on their pricing team and personalities that were more assertive, curious and outcomes-focused. They needed pricing talent that wanted to work with sales to deliver better go-to-market strategies, not people content with hiding behind spreadsheets.
Domain expertise and strategic influencing ability were critical to overcoming a barrier between sales and pricing.
Sales and marketing viewed the pricing team as a support function rather than the decision function it ought to be.
The sales team did not trust or believe in the pricing team. The pricing team lacked credibility and support from the rest of the business.
This happens everywhere. Organisations cultivate a talent management system that can sometimes cultivate behaviours that are the opposite of what was intended.
In this instance, the business’s talent management system was inadvertently reinforcing norms that were biased toward risk aversion and privileging non-confrontation.
These type of behaviours can end up policing the status quo. The pricing team begins to lose confidence in their ability to drive better pricing in the business; and the senior management team wonder why the team is not getting the financial results they were expecting.
When large, traditional businesses say that they want to find talented people for the business, what they actually mean is that they want people who can thrive in their talent management system. Building a pleasant and productive atmosphere is vital.
Many companies have a distinct “type” that they are looking for –which brings its own risks. Hiring to a certain type isn’t about hiring or promoting the best people or hiring for diversity. Hiring a certain type means identifying and describing your talent management system, and then building a ground-up recruitment approach from that baseline.
Understand what part of your talent management system is helping teams to drive results and what elements are blocking or even destroying productivity and morale. Then, when you know your baseline, you are in a position to hire and form high-performance teams.
Understanding your talent management system and the people who thrive in it is extremely valuable, particularly if you want to drive a high-performance culture. But let’s not confuse this with “talent.”
The talent evaluation and recruitment approaches often used in business can often drive managers and teams alike toward the wrong, inward-looking conclusions about talent and fit.
Identifying an individual as “talented” without objective and relevant evaluation processes to back up that claim can be problematic for a business undergoing a transformation.
Business can often hire people that they feel comfortable with; not people that will challenge them to be better or see things differently.
People tend to fear going against the group as they see people being rewarded for acting in a certain way or being punished for challenging the status quo.
To overcome these hurdles, we recommend identifying the limitations of your talent management systems and then building teams that can help you fix them.
Your talent management system can only evolve as you do that important work initially.
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