Want Some Extra Fire-Power As You Develop Pricing Strategy With Your Pricing Teams?
Having some deep expertise to call upon just as you and your teams need it is the best way to mitigate risks as you set up your pricing capability project
- Generate 2-9 percentage points of sustainable margin improvement with initial benefits within 3-6 months
- Identify the Organisational Structures and Pricing Strategy Framework to drive more revenue and safer margin growth
- Avoid costly consultancy fees and underwhelming results
Download your Executive leadership guide to Commercial Capability Building
THE NUMBER 1 MISTAKE
The biggest mistake CEOs can make is to overestimate the ability of consultants or algorithms to fix pricing and drive commercial strategy. Or, indeed, asking teams to put together tools that frequently do not work well together.
Relying on consultants and algorithms to drive strategy is a quick fix that frequently fails to deliver long-term results.
Asking teams to fix pricing without the requisite resources, capabilities and organisational structures sets them up for failure.
Having targeted advice at critical points in the pricing journey enables teams to bypass painful change processes. Driving commercial strategy three times faster than organic change.
This current wave of inflation is the worst in 30 years. Central banks around the world are working to target interest rates. The purchasing power of the dollar has fallen significantly over the past 10 years. Many price increases are lagging behind industry indices.
Your teams are operating in murky and dangerous waters with:
- The rise and fall of input-costs
- Demand spikes creating new cost pressures
- Large and under-valued product inventories creating substantial margin leakage
- Share prices plummeting when businesses cannot drive or capture price increases
The right level of support from advisors at the right time can go a long way. It can mitigate many of the risks that derail pricing transformations. While accelerating price rise problem solving to reach key milestones and outcomes.
IMMEDIATE RISK TO PROFIT
If legacy pricing practices are too slow and too lax, businesses will experience significant margin leakage. When sales teams have the discretion to further reduce prices by 5% and EBIT margins are 5%, 100% of the EBIT margin is theoretically at risk.
Pricing can be a lever for profitable revenue growth. But it can also be a major source of margin loss if there is no proper management.
The real elephant in the room is siloed culture. When a pricing project is led by IT vendors or strategy consultants, often culture and people problems are not addressed and yet another divisive silo emerges between the team and consultants.
When algorithms are relied upon to drive revenue they often don’t account for the extreme price changes necessary to offset inflation and cover costs.
When businesses rely on pricing systems to set and manage pricing, many vital workflows and processes are left unclear and execution often fails.
As pricing projects start, many cross functional teams are pulled together to work on the project. Many don't know the vision or rationale for change and do not see it as a priority. Others don't know what they are supposed to be doing. It is common for teams, for example, to prioritise low value, day-to-day tasks above mission critical price rise tasks with a deadline.
Working at cross purposes and in siloed businesses costs businesses millions of dollars in lost annual price rise revenue alone.
THE COSTLY ROAD TO RECOVERY
Since 2010, Taylor Wells Advisory firm have worked through 23 pricing transformations. We continue to work with teams to solve some of the most pressing pricing and commercial challenges. Including:
- Companies with no official customer prices or costs for thousands of products.
- Businesses with a legacy list price with hundreds of price inconsistencies.
- Firms that implement a price rise without updating their customer pricing records or contracts.
- Bulk pricing uploads with the wrong customer IDs.
- ERP systems with thousands of redundant pricing records.
- CRMs with rolling rebates and no performance targets or tracking.
- Special prices with no updates and thus never expire.
- No authorisation of customer contract prices.
From our experience, 3-9 percentage points of margin are lost across total revenues when businesses rely on broken consulting models, and as teams work within siloed structures.
Download your Executive leadership guide to Commercial Capability Building
HOW TO ACCELERATE COMMERCIAL AND PRICING STRATEGY FOR LEADERS & PRICING TEAMS
Getting pricing right is challenging for teams when they are managing millions of dollars worth of revenue, complex product portfolios and multiple contract agreements across many different market segments and customer groups. In addition, mistakes are much more costly when market environments are under inflation, competitive moves, fluctuating raw-material prices, and regulatory constraints.
However, it is possible for teams to fast track the journey from start to finish. How? By teaming up with pricing advisors to isolate the exact resources and activities that lead the business to revenue and margin growth.
We want to ensure your teams are successful in their mission to move the business from cost plus to value based pricing. This is why we offer a proven system of commercial advisory that de-risks a pricing transformation project.
Essentially we help you to build teams and structures (pricing & organisational) that have the potential to develop and deliver commercial strategy. Then, we use targeted and blended coaching programmes to unlock your teams' potential to drive profitability according to a strategy roadmap using Best-in-Class Value-Based Strategies & Practices, Margin Expansion Plans, Pricing Frameworks and Performance Support.
As we progress through the initial strategy development process with your teams, we use our optimised digital commercial system to capture all ideas, tasks, workflows and team independencies. Nothing is lost. Everyone knows why and what they are doing and how to do it.
OUR APPROACH TO DEVELOPING PRICING STRATEGY FOR COMMERCIAL EXECUTIVES & PRICING TEAMS
Unlike traditional consultancy, we strongly believe that the pricing transformation is powered through your teams from start to finish, not us. Our advisory, expertise and optimised systems support and guide them to reach outcomes faster. But its your leaders that take the lead. We enable and support them.
We are advisors, rather than pricing consultants. Unlike most consultants, we are willing to share our knowledge and collaborate. We do not enforce, rather we advise and co-create IP with you teams using latest research, best in class practices and proven frameworks and methodology.
We are a pragmatic firm: We will get into the weeds with your teams to fix technical and functional pricing problems and believe that you need to range between the detail and strategy in order to get the best outcomes.
Our key strengths are forging a path in chaos and then keeping things moving forward step by step until teams reach their strategic destination.
Learn more about our approach here.
Connect with our commercial capability building service
Our strategic advisory & support is spread out at different levels of the organisation. Starting with:
- Initiating Diagnostics - Strategy, Stakeholders, Systems, Operations & Data
- Strategic Resourcing - Pricing Recruitment & Capability Evaluation for Pricing, Sales & Marketing teams - (Internal & External)
- Margin Maximisation Planning - Project and price scoping. Evidence Based Size Of Prize Estimations. Project timeline Recommendations. Price Strategy Execution Roadmap.
- Pricing Strategy Framework Development & Testing - Price Structure Recommendations - Strategy, People, Systems.
CASE STUDY ON PRICING STRATEGY FOR PRICING TEAMS
HOW AN ASX INDUSTRIAL BUSINESS WAS ABLE TO GENERATE AN ADDITIONAL 9.5 PER CENT MARGIN IN UNDER 6 MONTHS WITH NEW TARGET PRICING
Taylor Wells was assisting a leading ASX business to improve its pricing capability as it transitioned to a new customer-focused commercial strategy.
This ASX-listed business was experiencing a significant earnings decline with EBIT margins of less than 5%. There was no standard cost measurement to estimate operational expenses. And there was no consideration of market pricing, willingness to pay or margin potential.
Legacy pricing habits were also deeply engrained in the culture of the business – ‘set and forget’ and ‘discounting to win business’ was the modus operandi.
Teams were tired and frustrated of working within broken systems. The general sentiment was there was no way out of the chaos. There was also significant talent churn and performance issues. Company culture was a liability to profitability and organisational health.
Taylor Wells started the commercial optimisation process from the top, focusing initially on drafting and planning.
To begin, we supported the executive team to identify key objectives and agreed scope for the roadmap.
We then devised an execution roadmap, including an organisational-wide communications plan to share with the whole business. And set up optimal team and committee structures. These include taskforces, governance and steering committees to oversee and drive multiple projects, deliverables and outcomes.
Then, we devised a system and structure of reviews, checkpoints, meetings, stand-ups, 1-2-1 sessions and feedback loops. This is to ensure capture of all information was captured and there are actions to solve problems.
All meetings had structured agendas with time to debate concepts and discuss project risks, challenges or changes. There were also regular team catch-ups and stand-ups to overcome daily obstacles.
The value of structuring projects like this was that it provided absolute clarity and agreement on direction, purpose and vision from the top down. It gave leaders and their management teams a starting point; a place to forge ahead and forums to steer and guide the projects.
Moreover, it also gave teams the structure they required to avoid working at cross purposes. Everyone knew what they were doing, and why and when. It cut out the red tape. Also, it gave teams a fluid and open system of communicating, capturing learning from multiple tests and trials across numerous workstreams.
The business did not have a strategic pricing function and comprehensive guidelines on how to set up and integrate a pricing function. This is needs the attention of every business.
Our first step in the integration process was designing and building optimal team structure and team roles.
Next, is the utilisation of our pricing recruitment service to help the business appoint a high calibre pricing manager.
The commercial requirements of the business needed a pricing manager with a special mix of skills, capability and potential. Hence, we employed our unique pricing manager assessment framework, datasets and talent pools.
Our Pricing Manager Assessment framework was the basis upon which executives in this business made their selection decision for this appointment.
Within 1 month we found a high-performing pricing manager with the capabilities we needed. The pricing manager has since been promoted in the business and the pricing function is a highly regarded and growing function.
From week 1 of the pricing manager joining the business, we began a structured onboarding process.
The onboarding had two main objectives. The first is to align pricing to commercial strategy according to the Pricing Roadmap. While the other is to deliver $1.5M in EBIT by the end of the year with incremental margin growth present from at least month 3 of the roadmap.
With these objectives and targets in mind, we designed an onboarding programme and workflows to deliver results in the first 3 months, 6, 9 and 12 months.
We developed customised pricing plans to support the pricing manager build a strategic price architecture.
Then, we co-created and developed strategies and analytics using a range of methods – value-based pricing, competitive pricing, attribute-based pricing to optimise revenues and prices.
We developed pricing communication plans, stakeholder engagement initiatives and then technical ERP price structure designs for a new ERP system.
To accelerate the implementation of these plans, we designed a system of structured coaching and communication.
All plans were actioned, implemented and delivered the required EBIT results.
When we were sure our pricing plans were capturing value, we initiated the next plans. These include plans for the sales and category management teams to bolster the results we were getting from the pricing project.
We built customised plans and workflows and aligned plans and workflows to the new pricing roadmap, strategy and mission.
All team interdependencies were mapped out. Every task was identified, prioritised and categorised within workstreams. Also, all workstreams and projects were given project owners and sponsors.
There were regular steering committee meetings that we helped to facilitate. Besides that, there were also frequent stakeholder and project meetings set up to ensure delivery from the line managers’ teams.
All of these meetings were all project managed and aligned to the roadmap and tracked using dashboards. What’s more, all ideas and actions were captured and given to owners.
Once team plans were designed and issued, the next step was to do a series of experiments. These include structured tests and trials to project stakeholders in sales, HR, category, marketing, IT, executive team, procurement, and finance.
Structured learning in this requirement was underpinned by testing, scientific investigation and subject matter expertise. If there were gaps in knowledge, they were filled in a timely manner. This is accompanied with targeted coaching to ensure delivery and decision-making were effective and speedy.
Taking the pricing manager function as an example. We worked with the new pricing manager to test if target pricing could be applied to uncontracted revenue. Then, we set up a trial. This is by combing through 21,ooo lines of data and establishing via testing new target pricing for over 6,000 individual line items.
Within 4 months, the business was generating an additional 9.5 per cent margin on the newly priced items. Within 6 months, new and proven pricing processes were documented and embedded in the business. All tasks, decisions and workflows were set up.
Many of the tests and trials set up during this time were ideas from the team as well as us.
This new way of capturing ideas and then turning them into real $ value brought about a cross-functional way of optimising sales, product innovation and pricing that was not dependent on us or any one person in the business.
What’s more, the new system highlighted all the great work the teams were doing. Teams were finally recognised for their positive contributions to margin generation, as the business finally had visibility of all the workflows, ideas and value capture being achieved on a daily basis.
Commercial optimisation is a continuous process. It involves all departments, not just pricing. Take HR, for example:
Do HR recruit and train people that are really in line with the business or its pricing strategy?
Are commercial teams incentivised, rewarded and recognised? In what way? Does it truly motivate people with unique pricing skills to deliver more complex business outcomes?
Are the pricing and sales teams set up properly to implement the commercial strategy – tool kits, training, resourcing?
If the answer is no across the board, unsuitable people are being employed. Training is less than effective. Salary, reward and talent management structures are driving talent away. Great sales teams are missing out on sales through no fault of their own.