Sometimes making a strategic plan for business to improve pricing can be difficult. Is the plan right or wrong? How do you know if prior to this point capability in pricing has been low?

 

For example, you may have constructed a great business strategy and the most optimally priced offering, but if sales and marketing cannot execute (and organisational incentives encourage sales and franchisees to push volume outside established guidelines), then the company’s investment in strategy; associated data tools like modelling/visualisation or pricing software tools and even talent can be wasted.

 

In this article, we will discuss why pricing should be considered when you are making a strategic plan for business. We will also discuss 4 organisational pricing competencies that can drive business model adaption. In addition, we will also share with you the 5 steps in making a strategic plan for business.

 

We argue that in making a strategic plan for business, a company needs to set up a collection of views on its organisational capacity and also its organisational pricing competencies.

 

At Taylor Wells, we believe that the 4 organisational pricing competencies will help a company determine whether the business strategy and planning processes consist of the needed pricing elements to push business model adaption and profitable revenue growth.

 

At the end of this article, you will gain an understanding of the four organisational pricing competencies that can drive business model adaption.

 

 

What Is a Strategic Plan for business?

 

A strategic plan lays out the business’ goals and a chain of action plans to accomplish those goals. Lots of companies operate in line with a mission statement (a document that declares the company’s mission and business goals). A strategic plan for business utilises that vision statement as a starting point. However, it also clearly states a strategic framework for attaining the objectives behind it. In addition, successful strategic planning doesn’t just express what a business wants to do. It also uses strategic thinking to describe how it’s going to execute those things.

 

What Is the Objective of a Strategic Plan for Business?

 

A strategic plan turns goals or targets into realities. The strategic planning process combines the pursuit of perfection of a vision statement with the decision-making realities of daily operations. Successful strategic management recognises the strengths of a business. For example, its dedicated human resources or the intuitive thinking of its organiser. It also accepts its limitations, such as a limited customer base, cash flow, or robust competition. Then it expresses a business strategy that utilises its assets, at the same time protecting against its liabilities.

 

Why you should consider internal price management when you are making a strategic plan for business?

 

To accelerate business strategy, consider making a business plan that can diagnose and address pricing challenges and opportunities quickly and effectively. Transitioning to a new operating and business model cannot be done in isolation.  Your pricing and revenue models and your unique sources of value are key components of business model adaption and success.

 

If you want to accelerate business strategy and you have invested in a sophisticated and expensive pricing system to upgrade your operating model, then you may want to evaluate your pricing strategy and implementation plan very carefully when you are making your business plan.

 

Remember when you are making a strategic plan for your business to never rely on a single source of truth. You need to frame up a collection of views on your organisational capability including your organisational pricing competencies. You then work out from here whether your current internal price management is adding to or detracting from your overall business strategy.

 

making a strategic plan for business

4 Organisational Pricing Competencies

 

The following checklist of organisational pricing competencies will help you diagnose whether your business strategy and planning processes have included the necessary pricing elements to drive business model adaption and sustainable growth and profitability in challenging times ahead.

 

1. Why you need to consider customer value management when you are making your business plan

 

Understanding customer value can provide important guidance for setting an initial price for a product, service or segment. It also helps connect the business to your customer base in a more meaningful way. At the same time showing up opportunities to re-think the revenue model.

 

Customer value management refers to understanding your value to your customer base in a very structured way. For instance, using a value canvas or framework to identify unique customer value drivers that answer key questions, like:

 

  • Why do some customer segments behave differently from other segments?
  • What problems do our products and services solve for our customers?
  • What do our customers want, avoid and value?

 

Definition of customer value management:

 

  • Customer-focused pricing strategies and analytics that enable the business to identify and quantify economic value drivers across multiple customer segments, products and channels to market

 

We find that segmentation becomes an issue when a business does not have a customer value management system. And or when a value-based segmentation framework is misaligned to the business and operating model. We also find that evaluations of the real margins by customer segment are poorly understood and inaccurate.

 

If you are making a strategic plan for business now and you have not paid enough attention to Customer Value, you will have gaps in segmentation and strategy and your pricing capability will be limited to costs, volume and numbers (sourced either algorithmically and with regressions and elasticities), and not the buyer-seller interaction.

 

Making a business plan ultimately combines an understanding of pricing science and ongoing qualitative analysis of consumer behaviour. You want to produce and validate assumptions on changing customer preferences/decision journeys and their impact on business model adaption. To do this, you must first evaluate your current organisational competency in this area when you are making a business plan.

 

2. Why you need to consider pricing strategy playbook when you are making a business plan

 

A pricing strategy is a set of principles and details on how the business is going to set prices by segment, product or service. A pricing strategy should be effective, agile (not set in stone) and closely aligned to business strategy. Price leaders often assume that prices should be set to maximise profitability, however, business strategy and CEOS often make market share the number 1 priority.

 

Pricing strategy needs to evolve with wider business planning processes and goals. Price leaders want to drive profitable growth when they are making a business plan. Yet, often, the conflict between market share and profitability make it difficult to transition pricing to a new operating model.

 

3. Why you need to consider the role of systems and toolsets when you are making a business plan

 

Advanced pricing systems use data and specific forecasting analysis to view financial performance retrospectively and proactively. Pricing systems can help you when you are making a business plan because they accurately calculate large amounts of transactional data (if the inputs are good) and in turn better understand profitability.

 

Price optimisation determines the optimal price for a good or service calculated from historical information on customers, the market, competitor, and a given set of constraints.

 

Price optimisation can also help you when you are making a business plan because algorithmic pricing helps price leaders to select an appropriate price, but also estimate with a higher degree of certainty the probable outcome of any changes.

 

4. Why you need to consider team skills & capability when you are making a business plan

 

If you are in the process of making a business plan, make sure you focus on people and cultural factors. How you run and operate your internal pricing operations can help you identify the latent thinking and behaviour shaping pricing decisions and actions in your business at all levels.

 

We recommend considering the following people factors when you are making your business plan: management alignment/decision making, organisational and team structures, pricing and sales skills, training, and talent management.

 

How to Make a Strategic Plan for Business

 

To be effective, strategic planning models don’t have to be complicated. Below is a straightforward guide that a business can use to enjoy the benefits of strategic planning without turning the entire business operation upside down:

 

  1. Determine your goals

Goals can be anything from broad (such as launching a company) to specific (such as changing a brand’s packaging).

 

  1. Do a self-assessment

Take a closer look at the business as it presently exists. Assess whether you have the cash flow and human resources required to see your plan to realisation. Determine the greatest assets you have to utilise. Business professionals call this a SWOT (strengths, weaknesses, opportunities, threats) analysis.

 

  1. Designate a team

Identify who will oversee this effort. It’s vital that the appointed team be given the liberty to make strategic decisions in a quick and skilful way.

 

  1. Make a research

Of course, it’s important to do research on what a business needs to do to meet its objectives if a company has business goals. For example, if the business’ main goal is to have a greater market share, then it needs to calculate how it needs to increase the customer base.

 

  1. Outline a plan for success

Once done with determining the goals, a proper self-assessment, appointing an appropriate team, and gathering relevant data, then it’s time to lay out the plan in detail. Create strategic goals and deploy them out at reasonable intervals. Encourage the organisation to be its very best, however, set realistic goals and objectives.

 

With the help of a strong strategic management process, a business can proudly push its organisation to the next level.

 

Discussion

 

When making a strategic plan for business to improve pricing, it is very likely that difficult pricing questions will emerge and may be difficult to answer. Especially for businesses new to strategic pricing.

 

  • Should we have a centralised or decentralised pricing function in light of changes to our organisational re-structure and business model shifts?

 

  • What are the roles and responsibilities, goals and incentives for everyone? Now that we have re-thought our operating model and associated pricing and revenue models?

 

  • What will our teams do now that we have invested in a new pricing system? And do they have the right skills, capability, and mindset to adapt to an advanced pricing platform?

 

Our consulting experience of over 23 pricing transformations, including complex restructures shows tells us that to stick to 3 guiding rules when establishing a new pricing capability.

 

  1. Don’t let the latest pricing issue steer you away from your long term strategic goals.
  2. Stay in control of implementing a strategy to market. Making a strategic plan for businesses that includes a complete review of your organisational pricing competencies.
  3. Shut out the noise, and focus on the things that matter when making a strategic plan for business. A deep connection with your customer base, your people, growth targets and sustainable profitability.

Implications

 

If you are making a business plan and not considering people and process, then it is very likely that you are only skimming the surface of internal pricing management. And or overlooking how people are actually managing and operating pricing departments daily in a business.

 

We recommend that when you begin making your business plan to include a detailed evaluation of internal pricing operations by pricing experts and advisory firms (not accountancy firms) to weigh up key challenges, opportunities and recommendation for improvements. We all have blind spots. Addressing them is central to becoming a learning organisation.

 

If you want to accelerate your business strategy, see if you are making a business plan that includes a thorough evaluation of your teams and management alignment. Is communication between teams poor? Does the organisational structure align with business model adaption? Do your teams have adequate skills and tools for effective pricing? Is it becoming difficult to implement a vision of tomorrow’s enterprise because your price execution is not working according to plan?

 

Conclusion

 

Often, when businesses make a business plan, they conceive pricing as a numbers-based discipline. When in reality, dominated by human interactions based on buyer-and seller dynamics. Similarly, within a company, strategy and implementation are often undermined by people, not systems.

 

Before you begin making your business plan, think. Review the following: your sales and pricing policies and procedures, reporting relationships, compensation structures, and team structures. All these people elements need to be clearly understood to enable you to make and carry out pricing decisions.

 

Without informed pricing decisions and effective internal price management, your teams and people are just guessing or taking potluck with competitive business strategies. This is where your competitors gain the advantage and margin erosion occurs.

 

“Pricing is the DNA of a business” (Dick Braun, VP Pricing Parker Hannifin). We highly recommend that when you are making a business plan you review the people side of the pricing equation. To ensure your strategic aspirations for the future come to fruition.

 

Click here to access your free pdf guide on driving pricing strategy in your business.

 


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