Successful pricing organisations, like GE, John Deere, Caterpillar, Shell, 3M know something most businesses don’t about financial advice and pricing.

 

They know that if the goal is to drive profitable revenue growth and more margin dollars in highly competitive and disrupted markets, they need talent pricing teams to operate within flexible organisational structures. In addition, these companies regularly seek price advice from external firms and consultancies on how to align their price, revenue models, and teams to a changing business model with new operations.

 

 

However, achieving pricing and organisational agility is much harder to do in practice. As businesses and markets change over time, employees settle into their roles. Without the right financial advice pricing, the structure seems to happen organically. Or else, pricing decisions devolve and revolve intentionally around a handful of influential individuals in the business. This article will talk about financial advice made easy.

 

From an outside-in perspective, it’s often hard to figure out how and why businesses act the way they do. Yet, from an inside-out perspective, we become used to things over time. Why? Because it is human nature to grow comfortable with familiarity.

 

With the lack of dedicated financial advisors, we question the way we do things less and less. “It’s just how we do things around here.” “This structure worked in the past.” “There’s nothing wrong with our pricing.”

 

When everything seems to be going well (i.e., predictably) we believe the need for external financial advice pricing is low. Our organisations continue to operate, business gets done, we make sales, people continue to buy, and things roll on.

 

But all of a sudden, a new trend, shift in the market or threat strikes the business. Then, everyone realises it’s not possible to succeed with their current structures. A handful of managers and executives may realise the business would benefit from price advice to control margin pressure. However, many firms suffer in silence and still operate in dysfunctional systems.

 

Admittedly, it’s not easy to take objective price advice when in financial pain or distress. What’s more, integrating a new pricing team within an existing structure isn’t easy and may even fail to drive results.

 

Change may seem daunting and disruptive but managers should be weigh up and evaluate price advice, multiple variables, and trade-offs. In business, it’s difficult when it becomes problematic with stakeholder relationships, team performance, price performance, new roles, career trajectories, and organsiational functions.

 

Financial advice pricing can seem costly. However, the pain of inertia increases the longer you wait. Moving through the changes is inevitable – whether you want to or not.

 

 

Listed below are 5 financial advice questions in pricing to ask before beginning the process. In addition, we cover how to design, structure, and integrate a pricing team (within the business in more detail in our e-book series.)

 

QUESTION #1: When should we start the design process?

 

PRICE ADVICE: It’s never too early. A 1% shift in margin can equate to $1M in EBIT. In fact, it will cost you more to wait longer. Large businesses and ASX-listed businesses like BP, Winc, Wesfarmers, CSR, Repco, Toll, DHL, and Oceania have all received external price advice to move from A to B. Some of them completely re-designed their operations and systems to improve pricing capability for the next 5 years.

 

A cross-functional team managing your pricing requirements on a part-time basis is not the best price advice. A project-based team structure will not be enough to generate the ROI you want. More often than not, it loses momentum.

 

For companies that have an annual revenue of $100M+, our advice is to install dedicated pricing and/or revenue management team to set and manage prices. The size and structure of the team are dependent on the revenue.

 

In the process, it’s also common to make hiring mistakes and fail to stop margin leakage. They fail to implement the right structure or processes to drive more complex pricing outcomes.

 

Therefore, it’s unrealistic to expect from employees with no dedicated skills or experience. These are needed to manage and set prices in light of the potential upside/size of prize available, the complexity of product range, customers, and market segmentation.

 

 

financial advice pricing

 

QUESTION #2: Who should help us design and manage the integration of the pricing function into the business?

 

PRICE ADVICE: It is important to have subject matter advisers contribute additional price advice to the design process, including price advice on team structure, diversity, specialist hiring processes, talent evaluation and assessment, and software integration processes. We’ve seen several good pricing teams set up to fail.

 

financial advice pricing

 

According to Australian Financial Review, financial advice service fees have increased to 30% since 2019. Still, there are other options to choose from, without having to spend a lot.

 

1. There are specialist firms located in regional and outer suburban areas that work with small businesses. Most of them charge a percentage-based fee from your investment performance, for instance, rather than fixed fees.

 

2. Others have taken advantage of the digitalisation of businesses as a cost-effective alternative. On the downside, the services will also be limited. They may provide short courses on finance and pricing, but discussions are limited to managing debt, taxes, and budgets, for instance. While other complex and personalised topics on investments are excluded.

 

3. Automated investment advice requires you to answer online assessments, asking about long-term financial goals. Then the system tailors your answers to recommendations from its algorithm.

 

The terms for financial advisors’ fees mostly change with the type of advice that they provide. If they’re in partnership with a product that they receive a commission from, they will likely highlight this in the discussion. Whereas, if the financial advice is based on your performance as a business, they will likely push for your investments to grow.

 

QUESTION #3: What’s the best way to assign the right people to the right function?

 

PRICE ADVICE: There are three key areas of price advice to help you assign the best people to pricing roles:

 

1. Don’t just rely on CVs and interviews or past success to assign people to pricing teams. Use an evidence-driven approach to back up your decisions. Don’t just use recruitment as a method to fill seats quickly.

 

2. If you want to know how good someone is at pricing and revenue management, get them to take our pricing and commercial assessment. Use this as a benchmark for their performance against relative industries.

 

3. It’s best to know if someone will be a good fit for the role beforehand. So, provide constructive advice on skills and development and a good insight into commercial pricing. They should know the challenges and outcomes that are expected in the new role.

 

Recruitment is a great opportunity not only to educate but to engage future employees with the role and mission of pricing in a business.

 

financial advice pricing

 

QUESTION #4: What’s the best way to design a pricing function?

 

PRICE ADVICE: No matter how similar cross-functioning teams may appear, there are always differences. It may be in leadership, strategy, structures, operations, and capabilities. This means that it’s important to have customised price advice, function, design, and integration process suited to their own complexities and grounded in the objectives of your business.

 

Proven pricing frameworks, team capability, and evaluation tools help you bring these functional differences together. The organisational design approach must be flexible enough to match the unique requirements of the pricing function and business. Above all, the entire focus of the process should be on value creation.

 

financial advice pricing

 

QUESTION #5: How can we break down resistance to change and convince people?

 

PRICE ADVICE: Your teams and leaders are much less likely to resist changes to pricing strategy and operations when they took part in shaping it.

 

To start cross-functional collaboration, leaders must seek external price advice and upward feedback from sales and marketing teams. It’s best to bring up objections and address them right away. Be open to feedback, communication, and share information in the decision-making process.

 

Oftentimes, sales are more welcoming of informed price advice and assistance from external consultants or pricing teams. They do resist being told what to do without a clear mandate or vision supporting the directive.

 

The design and integration process should help you broaden your scope. In fact, it’s about establishing a strong vision for change that teams believe in. Moreover, the change can be a great way for teams to quit operating in silos.

 

What is price leadership?

 

You’ll know it’s time to start asking yourself about seeking price advice when business strategies seem clear, yet numbers don’t add up and profit margins are low.

 

Types of price leadership

 

1. Barometric price leadership is when one brand sets itself as the “barometer” of market prices in the industry. This gives the company the freedom to predict market trends and create price changes.

 

2. A dominant enterprise has a large influence on market share. It relies on price elasticity or the dynamics between supply and demand to make better price rise decisions. Competitors and smaller businesses adjust to the price changes in order to remain in control of their market share.

 

In some cases, this may lead to competitive based pricing or even price gouging that small businesses end up shouldering the brunt.

 

3. In a collusive market, a group of industry leaders will “collude” or cooperate to set price benchmarks in order to gain an advantage over competitors. As a result, small firms need to adjust their prices based on these changes. In some countries, this is an illegal practice.

 

A price leader can get ahead of the market if:

 

– it controls a large market share with different branches and locations that allows it to serve more customers as it expands its brand presence. A competitor’s only choice is to match the price adjustments so it doesn’t lose its market share.

 

– it has the ability to predict market trends through research on competitors and customer behaviour. Not all companies can identify trends and base their decisions on forecasts for future profit and revenue margins.

 

– advancement in technology such as marketing automation and in eCommerce platforms are available. Investing in software has become a prerequisite more than ever as pricing approaches continue to change rapidly and significantly. This is best for pricing teams to be effective, functional, agile in new commercial trends.

 

– it can execute world-class strategies.  At Taylor Wells, we increase profitability and bring results as quickly as 6 months through our end-to-end approach to pricing transformation initiatives. We help firms break away from outdated hiring processes and guide them to design the right pricing organisational structures, roles, and responsibilities.

 

Why prioritise price leadership?

 

For one, an increase in profitability and annual revenues through high-quality products and services allows price leaders to charge at premium prices. Since price leadership creates “followers” in the market whenever you set price changes, it lets you take the majority of the market share.

 

With better features that set yourself apart from the rest of the market, there are more opportunities to invest in researching trends and forecasts that create value to influence buyer behaviour and customer retention.

 

However, keep in mind that there are customer personas that care more about price than quality. As long as demand remains stable and you’re able to justify premium pricing, customers are willing to pay for more value.

 

Yes, price leadership may create unfair competition but it also mitigates the risks of price war as smaller competitors are left to focus on protecting their assets and market share. They may attempt to lower their prices to maintain or increase demand. But over time, this can chip away their margins and revenue budget.

 

financial advice pricing

Implication

 

An organisational chart should follow an organisational structure – not the other way around. It’s the same as investing in designing a pricing team that drives sustainable profitability. Ultimately, it’s worth seeking the difficult yet rewarding work of financial advice in pricing to create a new structure.

 

 

Structure dictates the relationship between authority and accountability. It predicts how pricing teams will function and more or less, if the team will succeed in its mission.

 

For this reason, a good pricing team with the right advice can only be as effective in the business as the structures support it. For even the best of us, it can be very challenging to operate with outdated models.

 

Conclusion

 

Successful pricing organisations, like GE, John Deere, Caterpillar, Shell, 3M know that if the goal is to drive growth in highly competitive and disrupted markets, they need to operate within flexible organisational structures. They also seek impartial price advice on how to align their price and revenue models. They find ways to operate and change business models.

 

A poor restructuring will exacerbate attachment to the status quo and natural resistance to pricing adjustments. We find that when businesses ramp up their strategies without evaluating or assessing their structure, price implementations become disorganised, slow, and disappointing.

 

Alternatively, we find that when businesses modify their structure, strategy, and assign new roles without developing or updating internal price management practices, new teams struggle to drive better pricing decisions and results.

 

Without the right processes and price management practices in place, even great pricing teams end up firefighting. Until it’s designed correctly, all of this leads to a limited EBIT gain and even margin loss.

 

For a comprehensive view on maximising growth in your company,

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Are you a business in need of help to align your pricing strategy, people and operations to deliver an immediate impact on profit?

If so, please call (+61) 2 9000 1115.

You can also email us at team@taylorwells.com.au if you have any further questions.

Make your pricing world class!

 

 

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