Why Planning a Pricing Role is Vital! 📝 Podcast Ep. 42
In this episode of Pricing College – we discuss why it is so vital to really plan out a pricing role before starting the hiring process.
Many pricing hires fail to deliver on their promise – and this can usually be prevented by scoping and planning in advance.
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TIME-STAMPED SHOW NOTES
[00:00] Introduction
[01:06] Vague job description of pricing is a result of not scoping out the role
[02:55] The two fundamental problems when you start a pricing role in the company
[04:59] Joanna explains how to integrate a new pricing team within the business
[07:16] Importance of planning and scoping the role before hiring a pricing role
[08:47] Why do companies experience a series of bad hires in pricing roles?
Why do you need to scope out a pricing role before hiring?
In today’s episode, we want to cover a topic that sometimes people don’t consider before making their first pricing hire.
That often is when a company employs the first person in a pricing department or kick off the pricing project, oftentimes, they can be disappointed in the first year with the results.
They can think they might have achieved more or they hope to achieve more. But in many cases at Taylor Wells, we think that is down to at the beginning before you start the employment of the hirer of the person.
You haven’t scoped out the role. And you haven’t timelined what you hope to achieve in those first 12 months.
We do see a number of assignments.
A lot of vague job descriptions are being handed over and an expectation to get that pricing superstar that can do everything.
Even though, just because on that job description got literally every skill and task known to man or vice versa is just too vague. And it just indicates that there’s absolutely no scope that has gone into it.
And it’s just like… “Oh, we want that person to make the role their own.”
Yes, that’s a nice thought. But it’s either you want the person to take the role, their own, and it’s so vague that they can do everything. And then they sort of like anchor us.
Or, the job description is so tight and restricted and full of like… requirements that they have absolutely no room to breathe, create, and drive strategy.
So, we’re finding either end of the spectrum is occurring and both indicate there’s a real lack of scoping out the role. Scoping out the role, not in terms of what the strategy is.
The problems have got to be solved. The cultural issues that are occurring in the business, the change management requirement, the project management requirement, and the EBIT expectation.
How much profit do you want the team to make?
Then the ability to say… “Okay we’ve got the best pricing people on board. We’re going to allow them to do what they can do best.”
I think there’s a reluctance to let good pricing people do it. Because often, maybe the business doesn’t know what they can do. And that’s indicated by the scope and the lack of diagnostics prior to the hire.
I think there are two fundamental problems here.
1. The first one to me is when you’re employing a pricing person, let’s say you realise, there’s a problem.
But just because you know the problem, it doesn’t mean you know the solution. Oftentimes when you recognise a problem such as, “We have no pricing strategy,” that insinuates that you do not know the solution.
When you draft a job description, and we see these oftentimes when companies are so committed to annual reviews, metrics, and this idea that if you can’t measure the accounts, you can’t track it. What can happen is people are tied to ludicrous metrics that have nothing to do whatsoever with the job.
So, the metrics can be set and the job description can be written by people who fundamentally recognise they don’t know what they’re doing.
What that will do is lead people, lead the first person to come on board or the pricing person leads them down the wrong path. They’ll know what they have to do. But their actual contract may state the complete opposite. So, that’s a fundamental flaw.
The only thing that’s strange about that is you can come on and start a company and be presented with your metrics and your KPIs. And the person looking at them can think, “This is ridiculous!” That’s the first law.
2. The second one, I would say is in a timeline when you started pricing role in any company.
Specifically, if it’s the first time it’s happened in a company, there can be pushback. We’ve covered another podcast, whereby, everyone knows a little bit about pricing where everyone has a view on it.
So, if you start in the pricing company. You will get pushed back, you will get people’s issues with sales, marketing and operations, with the people who control the P&L. And that pushback will happen and unless you have easy wins, timeline produces and shows those easy wins to the company that push back will get more and more.
And sales or people like that who want to protect their turf, there’s nothing they welcome more than the opportunity to say… “ Oh, this new department is useless or this new department is not cutting the mustard.”
Often, people say to me, “How can we integrate this new pricing team within the business without disrupting our operations or our other teams?”
I suppose it’s the same answer. You’ve got to understand and scope out the team structure, the role, and understand the problem.
As Aidan says, some people do understand the problem. But I mean understand the problem in detail like a pricing expert.
I mean, even get the pricing person to do another diagnostic to show you how a pricing person views your business problem. Not just from a strategic high-level strategy from a pricing perspective. Because then, you’ll see it in a whole new light.
I mean, I speak to a lot of CEOs and they often say to me that, “We didn’t realise we had a pricing problem until three or four years down the line. It cropped up in other ways. We only started realising it could be an issue when we saw the amount of discounting that was happening. And our sales team saying, ‘we don’t trust the price list.’ Other than that, it was just like the way it was. I didn’t even know there was someone who called a pricing manager to fix a lot of these issues.”
People just relied on legacy price lists.
It was just what happened and nobody questioned that. Everyone just assumed, “Oh we know we can solve the problem may be by just consolidating or buying our competitor. That will solve the issue.”
Temporarily, it does. But then, a new one crops up.
What do you do to compete? You’ve got to review what the value of the business is in terms of:
- How do customers buy and consume your products?
- Is the price, therefore, right?
That’s called the pricing discipline.
This is where it’s evolved. And pricing people are good at that. That’s where the depth and breadth of expertise lies. Their job in a way is to show you that different view.
We don’t expect CEOs and CFOs to be pricing experts. That’s why you get a pricing team. You want that fresh perspective. Because that fresh perspective will help you with a whole heap of problems and stop margin erosion from occurring because of pricing.
Why planning and scoping out a pricing role is important?
That’s certainly true. I suppose my final point I’ll say about pricing is, no matter who you hire, no matter if you employ the greatest pricing expert the world has ever seen and put them in a company… and you put them in an office. Then they’re not getting any support, the CEO, the chief executives and the big senior executives in the business don’t listen to them.
If nobody listens to them, if nobody supports them, if there’s no forum for discussion of ideas… if those structures aren’t in place, if there’s no support given when needed, and if the other stakeholders in the business believe they do not have to listen…or, even communicate with this new department, it’s almost guaranteed to deliver no value whatsoever.
If you add on to that metrics that are valueless or metrics that do not help or even go against what is the department’s trying to do, you’re almost locking in failure.
And so, it’s like building a house. If you want a house to last, you have to build a great foundation. But you plan and build the foundation before you start in the building. that’s how I’d set it out.
With any pricing department, it’s a great opportunity before you hire the first person. You’ll save money down the line by spending a little bit of time and effort.
Scope it out now. Get some expert advice whether internal or external. Or you’re just doing your reading.
But think and dig into…
- What do you want your team to do?
- What do you hope they achieve?
- And, what you and your senior leaders will do to back them up to ensure it happens?
Bottomline: How to avoid a series of bad hires in a pricing role
In many ways, if you have experienced a series of bad hires in pricing. And a series of failed price implementations, this isn’t because of the individual pricing manager. Or because the sales or marketing team didn’t work together.
This is indicating problems at a systemic level.
- The structure is not working.
- The organisational design is not working.
- The price system is broken down.
Individuals don’t matter how brilliant they are if they can’t fix a broken system.
Putting just yet another person into a broken system won’t work and won’t fix your pricing problem. We have to rethink all of this.
We have to go back and think, “What am I doing?”
Have that pricing diagnostic re-scope the role, and rethink your business operations. Businesses at the moment are going through complete pricing and business transformation. Because the markets moving forward very rapidly.
Digitisation is taking hold.
It’s not good enough not to have an online solution. It’s not good enough even in B2B to not think about your only channel direct to market solution. Because a lot of B2B are going direct to market now. They have no choice.
With all of this, think about the future of it. Think about where you are now, the problems that you face. And start building your pricing team according to these realistic problems. Because there’s a lot of things, a lot of problems at the moment that they need to tackle.
But not thinking about getting that expertise in because you think you can fix it with what you’ve got, is not going to work.
I don’t think for a minute that this is purely a pricing function issue.
I’m a big believer that in 2020 and over many years, the business has become almost dictated to you by human resources. Even the hiring manager, the person in the department. They want to hire somebody and they want someone to do the job.
But often, the gatekeepers at the human resources department fundamentally do not understand in many cases. I’ll caveat that in many cases do not understand, even what the department does, let alone what they want this new function to do.
This applies to any expert function that’s not run at the mill.
If you’re trying to employ an expert engineer or computer software designer, a great marketer, even a great lawyer to get you off from an accusation or anything like that…we need expertise. That’s niche expertise.
There’s an issue. How do you know what you’re buying when what you’re seeking to buy is knowledge?
If you’re seeking to buy knowledge, it’s very difficult. And we’re not a labour-oriented service. If you’re seeking to buy expert knowledge, expert assistance, you need to know a little bit about what you’re buying in advance. Otherwise, you make mistakes.
I completely agree.
The pricing disciplines, moving on.
You need somebody who’s got the knowledge, can do something with the knowledge. Build new structures, build a new architecture, and extract value for the business, and value for the customers.
And only then, will you get the results from your pricing team and manager that you expected from them when you first start setting up the team. Up until then, if they haven’t got all of that, then you are not going to get the results.
They need to be set up for success.
That’s it for me. I think there’s nothing more satisfying than seeing the money flowing. Seeing profits increase, the business improves and seeing a project happen and work.
Fundamentally, you’ve got to plan if you want that success. You’ve got to start planning today.
What does that mean in financial terms? It can be 3% to 7% additional margin every single year when you get your pricing team set up and cranking according to the market, the business strategy. And everyone knows and is fully aligned with the business and know what they’re doing.
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