What is the Pricing “Eureka” Moment? 💡 Podcast Ep. 67
In this episode of Pricing College – Aidan and Joanna discuss what a lightbulb or eureka moment is in pricing.
This is when you actually realise what pricing is and can be – and that it is so much more than cost-plus in a spreadsheet.
TIME-STAMPED SHOW NOTES
[00:50] What is a lightbulb moment?
[02:28] The real lightbulb moment is when they know that pricing is a process
[03:50] Aidan talks about the number of major flaws he experienced while working in corporations
[05:20] In pricing, why doing modelling and analysis are just 30% of the job?
[06:08] In a lot of corporations, pricing is an unknown unknown.
What is the pricing lightbulb moment?
In today’s podcast, we want to talk about the lightbulb moment. The light bulb moment is the minute when people realise all of a sudden seemingly, what pricing is?
I’ll be honest there is a before and after when it comes to pricing. In the world of pricing if you’re a pricing professional, sometimes you need to help other stakeholders in your business have that light bulb moment.
I suppose the light bulb moment does depend on the pricing maturity of the business.
If there’s sort of level one or two limited pricing maturity in the business. Or no established pricing team there. Then it may not be the pricing team that had already the lightbulb moment. And educating stakeholders on their lightbulb moment to understand pricing. What it could be in the business.
So really the light bulb moment can occur in a business, which let’s say is a sales organisation with no pricing team. It may be a sales manager, it may be a sales rep, it could be the CEO.
In many respects, they’re very learned in the business when they have this epiphany. This light bulb moment. Because they’re the only ones that realise that pricing is the number one profit driver.
I can certainly look back before I knew anything about pricing. My background was working in a bank. I then work as an accountant in different financial roles in companies.
I’ll be honest, I have never heard of pricing at all. And even when I first heard about it I thought this was baloney.
To be honest, I thought pricing is putting a number into a spreadsheet or an accountant system.
The cost-plus or some sort of maintenance of pricing in a system. I think if you look at a company and you go in and you’re asking yourself, has the CEO, the Marketing Director, these big senior executives have had that lightbulb moment?
If they think accountants should be running pricing. Well, I put my money on the fact that they haven’t had a light bulb moment.
I suppose in a way that CEOs have had that lightbulb moment or an executive that has had it. Maybe originally thought they had it.
But actually thought that the pricing problem they’ve got could be easily fixed with that silver bullet pricing system. Or Quick Price optimisation to drive an immediate EBIT growth.
That really isn’t a price bold moment. That’s just seeing pricing as a tactical almost a bandaid to fix something that solved a headache or a pain.
We need something like more money, more cash flow, increasing profit, or reducing risk in some way. That’s getting to the lightbulb moment but isn’t really fully the light bulb moment.
A light bulb moment is when you realise that pricing is a process.
It’s transformative. It requires skill, expertise. You need to pivot. You need to take a broader, agile approach to Pricing. Then it needs to include your customers too. Understanding how your business can connect with your customers and their P&L. Their deeds and all of that sort of stuff.
Flaws in the corporation
I look back to when I worked in corporations, B2B industries. And you’re trying to get people to come aboard the project. You’re trying to get them to understand stuff. I’ll be honest, I noticed a number of major flaws.
The first one is often senior executives just do not listen.
Whether that’s a hierarchical thing or an arrogant thing or whatever it is. Or they’re too busy often they just will not listen.
Secondly, not everyone has absolutely excellent explanation skills, discussion skills, promotion skills.
People always talk about in the company you need to be political and this sort of stuff. I’ll be honest, a lot of people just are not focused on politics. Even if they are good at it.
I’d often say that a lot of people in pricing that’s not what their focus is. A lot of their focus is on getting the job done. They’re more practical and more results-oriented. Not so much in the top political stance and often in corporations. There’s a gap there where you’re not getting that message across.
So like when I was there, I was trying to promote. I even give people books at one point in time. Introductory books on the topic, the William Poundstone big on pricing. Priceless I think was the name whether they read or not is a different question.
But I suppose that’s one of the reasons why we’re doing this podcast to create easy listening, introductory stuff. We go into more depth on certain topics also. We cover the broader remit of this subject area. Hopefully, someone’s listening to one or two episodes.
It will spark interest it will help them move along the line to full understanding.
Many of the pricing and revenue management teams that we build. Our clients drive a particular strategy in a particular culture and industry.
I often find myself saying doing the pricing modelling and analysis are almost like sort of 30% of the job.
The rest is educating stakeholders, driving change, and trying to crystallise that vision for change in the business according to them. So they can really get it. And so they can drive that lightbulb moment forward to the next stakeholder.
Because the pricing doesn’t just stop with the pricing team. It really is an organisational capability.
I think we’re recording this podcast on the day of the US election 2020. I’ll mention a quote or I don’t know if it’s a quote of water days from a famous US politician Donald Rumsfeld. And his famous comment about known knowns known unknowns and unknown unknowns.
I’ll be honest, in a lot of corporations, pricing is an unknown unknown.
They don’t know it exists, let alone know how to do it. So when you’re in that position, you have to somehow get people just having the awareness.
The people don’t have to know how to do pricing. They just have to know what it is and what it can do. Then leave it to someone else or work with somebody else or partner with somebody else to get it done.
But if you’re in a position where the quote Rumsfield is an unknown, unknown. There’s a lot of work to do at that point in time.
So we’ve covered that lightbulb moment.
Almost like the unspoken role of the pricing team to really drive that change crystallises the vision. But if you don’t have a pricing team in place then really it’s up to you to drive that vision for change.
It is possible but again, it does require you to know, once you get past that vision for change. Then it gets to “okay, we need to do something about it”.
We need to actualise that change.
- How can we build a pricing capability from strategy, from models and systems and structures?
- How can we mobilise people together to really get the outcomes that we want from that vision?
This is where you do need that expertise. Maybe systems along the way and the right strategy.
They use to connect that lightbulb moment, that vision for pricing to your business strategy.
- Are they in sync?
- Do they work well?
- Are they going to generate the results you really are expecting from them?
- And if not, you have to take a good hard look at either [A] your strategy or [B] your vision or even see the mindset of the business. Are they ready?
So these are all key questions and they’re big questions to ask yourself and to answer. So feel free to get in touch with us. You can connect with us via our website, taylorwells.com.au and just book yourself a time and we’ll have a talk.
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