Factors Influencing Pricing Decisions: Is Your Pricing Manager 👨💼 Turning Into A Pricing Czar..?
Factors influencing pricing decisions are there to keep the manager from becoming the pricing dictator or Czar. Your pricing leader is supposed to be a crucial contributor to business pricing and product mix decisions. But things can go downhill rapidly when your pricing leader starts behaving like a defensive Pricing Czar, rejecting the team’s consensus and dictating the rules of the land.
A pricing manager role is a mission-critical role: Ultimately, all eyes are on the pricing manager to make more profitable pricing decisions in the safest way possible. The business is relying on the pricing manager to find profitable and safe pricing solutions for your financial woes, yet sometimes it’s not always the case. The result; business is in trouble. And within no time at all, the pricing manager and business are at odds.
Feelings of resentment and rejection can have a deep psychological impact on the pricing manager, resulting in breakdowns in communication and dysfunctional behaviour. You’ll also fail to capture the objectives of pricing decision you expected from your system.
We have seen some pretty decent pricing managers, for example, turn into Pricing Czar’s during critical phases in strategy execution. The first condition is when stakes are high; and there’s heavy pressure from the board and executives to get results from pricing. The second condition is when good pricing work has been routinely overlooked, underappreciated, or worse still, criticised or not taken seriously by stakeholders or the executive team.
The Pricing Czar against the factors influencing pricing decisions
The Pricing Czar is a strange dictatorial character (and someone you don’t really want to see). They basically lose their logical skills and begin to tell the business how things are going to be – rather than engaging and coaching them through the pricing process.
Based on this, then, you may be suffering what is officially called by us psychologists as ‘Dictator-by-Default’ syndrome or as we, at Taylor Wells call it: ‘Pricing Czar’ syndrome.
For decades this dynamic has been diagnosed as a problem of leadership or teamwork or both.
To combat it, companies are now using assessments, teambuilding and communications exercises tailored for pricing to teach the team exactly how to:
1. Have assertive conversations to drive better pricing options
2. Deal with conflicts arising from common pricing problems and issues
3. Provide and receive feedback to stakeholder
4. Establish mutual trust based on coaching and education
However, our research shows that when pricing leaders or teams routinely struggle to deliver good pricing options for the business, the problem may not necessarily be a result of their deep-rooted psychological issues, personality or incompetence. No, it’s more likely to be the result of broken and flawed business planning and decision-making processes.
In reality, each member of the executive team has an active interest in the organisation. So each vies for resources for their favoured projects—aka politics and bureaucracy that lead to decision-making bottlenecks and even deadlock.
To get around these bottlenecks, the pricing leader may choose to take action, making unilateral decisions that may go against the status quo. This Pricing Czar-like behaviour can leave some members of the business and executive team feeling disgruntled.
The Pricing Czar, however, leaves work feeling they have done what’s best for the business – and are often ignorant of the fact that their behaviour has displeased, upset or unsettled the business. Very often they don’t even realise that they are being defensive or difficult to deal with. They think they are doing a great job – despite the constraints, bureaucracy and politics.
Here are some tactics to improve your organisation’s factors influencing pricing decisions if conflicts arise with your pricing team:
Specify your desired pricing outcomes
Without clearly articulating your pricing outcomes from the very outset, the pricing leader’s and team’s ability to develop the best pricing options is largely based on unspoken and often differing assumptions. The Pricing Czar or “dictator-by-default” syndrome then raises its ugly head. So, to avoid seeing the Pricing Czar too often, make sure you map out the goals and outcomes you want the pricing leader to reach and document them.
- Ask the Pricing Manager To Give You A Range of Pricing Options (not just 1 definitive answer)
Achieving your desired pricing outcomes means exploring alternatives. Don’t just “Reject the pricing managers plan,” or “Defer the decision”. These actions give mixed messages to the pricing manager and makes them feel unsettled and unwanted. Address your issues and problems with them. Work through their pricing solutions until you understand them, and then provide meaningful feedback. Options need to be explored and you have a part in creating them too.
- Test Fences and Walls
When a pricing leader cites lots of reasons for not doing things (for example, a real or imagined corporate policy), ask them: “Is it a wall (is it relatively immovable) or is it a fence (Can it be moved)?”
Survey the pricing team regularly to find out what problems they are dealing with right now. Identify their preferences and focus the subsequent discussion on fixing the problem.
- Assign Devil’s Advocates
Making logical counterarguments is an expected part of strategic deliberations. Assign the devil’s advocate character every time the Pricing Czar appears to force the pricing manager to consider alternatives to their ‘go-to’ pricing option. This removes the emotional aspect of the discussion and produces more nuanced strategy discussions.
- Understand the problems
To avoid the Pricing Czar syndrome, you as the chief executive, financial executive or commercial leader must first understand the conditions that caused it. This can be difficult: As each stakeholder ultimately represents a voice and a position in the organisation, from marketing to operations to finance – and everyone has a different view of the pricing decision definition. What you need to do to get through these differences and find factors influencing pricing decisions that benefits the collective rather than agendas of one or two individuals.
Reaching collective pricing decisions based on individual preferences is an imperfect science. Therefore, the majority of answers can clash when a group of three or more people attempt to set pricing priorities among several issues.
When a pricing leader cannot make decisions or provide you with good price options, executives often blame psychological factors like mistrust, poor communication, and personality. When actually, their psychology is not the real problem for either you or them; rather it is a breakdown in business planning and a defective decision-making process.
Without clearly articulating the pricing outcomes you want to achieve; pricing leaders and team members will inevitably choose options based on unspoken, differing assumptions. And, this is a problem for you because untested assumptions won’t give you the results you want and need.
If your pricing manager acting more like a defensive pricing czar than a level headed advisor. Hence, don’t blame yourself, ask instead why they are acting in this way.
Or if you are a pricing manager who’s finding it difficult to get buy-in for your work; don’t blame the business. Therefore, rather ask yourself how you can reframe the problem; improve your skills and help the business get a higher return on net assets and/or greater growth.
Remember: people find it very difficult to think about the organisation’s pricing capability holistically. The routine of work can narrow people’s view of the world. Sometimes they even forget why they were hired in the first place.
Everyone, even pricing leaders, can find it hard to divorce themselves; from their functional responsibilities and habitual ways of thinking about pricing. Thus, this is why executives ask experts from outside the organisation; to help and encourage their pricing teams towards best practice again. To break the unhelpful cycle and re-frame problems into revenue and margin opportunities and deliverables.
If you would like more advice on better ways to create and drive pricing strategy in your business, ask Taylor Wells who has the expertise to get you there.