Value based Culture: The Best Pricing Teams Are The Instigators Of Change 📇
Value-based culture in a business is one of the most challenging parts of a pricing transformation. The hard reality for CEOs and boards alike is that culture can often make or break your business agenda.
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A poor culture can quell progress on a new price software integration and delay the development of more sophisticated go-to-market strategies, models, pricing offers, commercial focus and price constructs.
The value-based business culture program required for pricing projects can’t just be achieved through a top-down mandate. It lives in the collective hearts, minds and habits of your people and their shared values, beliefs and perception that; “changing pricing will drive more profitable outcomes for everyone” – sales, marketing, pricing, finance, the executive and your customers.
In any business, it needs to determine its values to build a foundation. A value-based culture is visible through the actions and implementation within the business. It defines the core, vision, guiding principles, beliefs, and priorities as the fundamental driving force of the organization. More importantly, it establishes who a company is and what they want to be in the future.
What is a value-based culture?
Any company that aims towards a value-based culture should be composed of at least 4 to 6 core values that centre on everything it does. Therefore, it must develop value statements according to the services they provide. For example, in the medical industry, one of its core values will likely be focused on “caring.” So, the goal is to motivate and empower an organization and its employees as it creates closer relationships in the team. Values are exhibited in the workplace daily and in customer interactions.
An example scenario of valuing integrity in a team is when a manufacturing company experiences quality and logistic issues, they inform customers right away to avoid any problems and address any delays in delivery time. However, if integrity is not a core value, then the company may mislead customers and make up other reasons for the delay.
If an organisation values equality and familial relationships, then its seniors may encourage openness and approachability towards its employees. For a company that values its people, it will likely provide health insurance or performance raise and bonuses to its dedicated employees. In the same case, you will want to work with a pricing team that values a strategic framework to serve its clients.
Compliance vs. Value-based culture
In a compliance culture, general company policies require employees to comply with set rules or laws. Codes of conduct are based on rules that are enforced by the management team. In short term, a compliance culture is effective but it lacks a focus on long-term values. For example, securities and exchange regulatory compliance are applicable for public companies. To put it simply, compliance culture focuses on human behaviour and changing it. However, there should be a balance between compliance and value-based culture as some companies adopt both.
In values-based leadership, the management knows what is important in the organisational culture. They intentionally demonstrate their commitment to the organisation’s values when making decisions and fulfilling their mission. In effect, it creates a culture of trust, transparency, motivation, and open communication towards a common goal. As employees understand their core values and align them with the organisation’s, it brings solid personal and professional connections. Leaders who adopt a value-based structure ensure overall success in their employees and organisation.
Value-based pricing approach
For CEOs seeking to generate additional margin using pricing. a value-based pricing approach demands a rare balance of technical know-how and a diverse range of thinking and management styles in your teams.
Very often the teams you need to get you through a pricing transformation successfully are those who challenge traditional corporate culture and values, including the importance placed on operational excellence and throughput efficiency.
These people might not be in the business currently. Thus, you may or may not have a pricing leader or team set up yet. Alternatively, it may be that you’ve got an established pricing team already, but they are not generating the profit improvements and incremental EBIT growth you were hoping for. (See our blog on commercial coaching for how to effectively progress in your pricing career.)
There is a huge difference between a pricing support function and a world-class pricing and revenue management function. Therefore, don’t expect a pricing support function to build the momentum required for large or complex price analytics and supply optimisation programmes. Hence, they simply don’t have the expertise and mindset to do it.
How to implement a value-based culture
Taylor Wells research shows that the most significant and profitable value-based culture programmes come when businesses build an integrated pricing function with a competent pricing leader and a diverse mix of supporting pricing analysts – highly analytical, yet highly adept at tapping into each other’s diverse skills and coaching sales and category teams on the rationale for change.
Pricing support functions are largely administrative and are key to managing data systems for quoting and/or issuing correct prices from the system. In effect, world-class pricing functions, conversely, have the expertise and pricing skills (technical and soft) to create better market strategies and analytics that capture more revenue and margin, no matter the historical differences that have occurred between divisions and teams (i.e., whether sales had but no longer have discretionary pricing power).
We believe that CEOs and other executives can learn a lot from how effective pricing leaders and world-class pricing teams initiate, engage and mobilise teams and stakeholders to adopt a new vision and team norms.
High-performance commercial leaders and world-class pricing teams are skilful at creating a climate of value-based culture for pricing improvement initiatives that sales, marketing, finance and your customers want to be a part of.
Effective pricing leaders and world-class pricing teams can influence, educate and create positive reasons for others to want to change an old pricing system. Thus, they leverage their domain expertise to test and trial practical pricing strategies and analytics that make more revenue and margin for the business.
Educate people on fundamental pricing principles in a value-based culture
World-class pricing teams utilise their domain expertise to educate people on fundamental pricing principles and provide insights on the market to help sales win more deals and support the executive team to drive profitability.
World-class pricing teams co-opt existing networks and influencers in the business for leverage. With that in mind, they use the collective power of key stakeholders and teams to move your pricing into a modern era – i.e., one where it is possible to make more profitable pricing decisions in a transparent market without the fear of margin erosion, non-compliance, risk and profit downgrade.
If you do not have this kind of pricing team or a value-based culture executive, manager or analyst in your business, then we recommend hiring a small, but highly skilled pricing team for your business. Without one, you’re really just setting up your pricing project, initiative or transformation up for failure.
Top 10 Tips for successful value-based culture in businesses
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- Even though pricing is logical and you need to be highly analytical to do it properly. Additionally, never forget that the business culture change required to get a pricing project off the ground is always driven by emotion.
- Emotion is the number 1 driver for long-lasting change. People change when they hear a genuine reason for why they need to unfreeze an old habit.
- Effective pricing leaders and world-class pricing teams inject urgency into people because they demonstrate the pain and cost of doing nothing. Hence, they show people that settling for the status quo is much worse than the pain of change – or even the pain of trying and perhaps failing.
- Businesses mistakenly believe pricing is always logical. It is not. Additionally, many start a pricing transformation with a logical call to action. This is a mistake. A call to action has no emotional resonance; it does not connect with anyone. No one is listening.
- People (even the most intelligent people) ignore logical reasons to change traditional pricing practices and excessive discounting. This is because logic bypasses human emotion. People are emotional. Logic does nothing to motivate people. Emotion is what motivates people to change on a fundamental level.
- You don’t need to hire a large pricing team to build significant momentum for change either. A small team of the right mix of people can mobilise people into working together to build a better pricing system that works for your business.
If you are transforming your businesses’ operations and need to re-think your pricing strategies, structures and operations as a consequence, never settle for a second rate pricing team – or even an ad hoc team of well-meaning managers. You can’t expect sales or finance managers to drive a pricing project when they do not have the right mix of pricing skills (soft or technical) to do the job properly.
We strongly advise that you take time and care to hire the absolute best pricing manager for your business and project. You need a high performing pricing lead with the know-how and diversity of skills. And lateral thinking capability to drive positive change in others while delivering early wins. These wins, don’t have to be big wins, but they do have to be framed and owned by the pricing team in the right way.
Hire small but smart. Don’t waste your money on large project teams with limited pricing expertise or insight; into underlying culture and talent management systems.
Carefully select pricing leaders that can leverage their expertise and passion for pricing. To embed better pricing at all levels of the business with minimal cost and disruption.
Conclusion
Business culture is one of the most challenging parts of a price improvement project or major business transformation. Thus, CEOs and boards now must choose their commercial leaders and pricing teams carefully. This will help to get to the level of business culture they are expecting.
Letting change happen organically takes time, and often doesn’t go the way you want it to go. In effect, the health of your teams and culture will make or break your business agenda. Hence, the same goes for your pricing project.
Don’t expect teams to play nice just because you asked them to. With that in mind, often people become highly territory about pricing – and emotional sentiments only emerge when you start to change your prices. As we discussed in this article, making a decision on business culture change is based on emotion. And, driving better pricing throughout the business starts with emotion too. Thus, logic enters incompetent delivery, scientific enquiry and process, and analytical modelling.
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Early wins
Early wins are powerful in demonstrating competence to the rest of the business, in particular, the sales force. Thus, when sales view the pricing team as competent and see them making headway, they will seek advice from them.
- Credibility and a strong track record of wins are very important to the long term success of the pricing team. Hence, people only tend to get on the pricing bandwagon when the pricing team is a positive force.
- A pricing team must have strong energy levels and competency levels. They must get as much momentum up as possible in the first 3 months of starting a pricing project. Or else other teams will simply not join in or ‘play nicely’.
- People are attracted to rising stars, not sinking ships. Get some small wins on the board each and every month. Watch your pricing project gather force and scale across the business.
- Make sure you build a small but effective pricing team; with the right mix of skills, styles and capability to drive profitability.
- Carefully select pricing leaders that can leverage their expertise and passion for pricing. The reason behind this is to embed better pricing at all levels of the business with minimal cost and disruption.
For a comprehensive view on integrating a high-performing pricing team in your company,
Download a complimentary whitepaper on How To Improve Your Pricing Team’s Capability.
Are you a business in needs 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.
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