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Driving Compliance with Collecting Market Pricing

By: Special Guest Author Patrick J. Taylor
January 2011 Pricing

I believe that over the next ten years we will witness a failure of most major corporations in America who do not establish a disciplined pricing process for the purpose of continuously monitoring and responding to market pricing. This will be especially true in business to business markets where actual competitor pricing is known only on an ad-hoc or anecdotal basis. Because they will not effectively compete or they will not be profitable enough to attract investors, these companies will cease to exist.

Knowing what price it takes to win business without unnecessarily leaving money on the table will become an everyday standard for doing business. Like what we have witnessed with the implementation of Supply Chain Management, Quality Initiatives, and IT systems over the past few decades, those who lag behind will not be able to effectively compete.

Observing market pricing is a skill that your organization needs to adapt. So, how do you drive your team to take on what may be perceived as extra work?

If want you to add something to the plate of people who are already “busied-out”, we have to do one or several of the following:

  1. Take something off their plate.
  2. Offer a process which is easier to use than what they are doing today – reducing their workload.
  3. Help them see the personal benefits to be had.

Who will be impacted by tracking market pricing? And what are their concerns? And more importantly, how about a few examples of applying the three above!

Over the years, I have heard non-sales personnel complain their sales team will sell at any price just to close the deal. In many of the companies I have observed, there may be some element of truth in that price tends to be too easy to sacrifice. But, I find that most salespeople truly care about their companies. Yes, they need to earn a living. But, they sincerely do want to do what is best for the company.

Their concerns are straight forward. They may not be confident the products or services being offered are really of a vastly better value than the competitors. Because their pricing knowledge is based on the last one or two sales they made, they also do not trust when others try to tell them the market price – especially if it is different from what they recently quoted and successfully sold. Finally, if you really needed to ask, they will tell you, “please do not add more paperwork or ask for anything that slows me down!”

Creating a process whereby the salesperson tells us what prices they offered and to which market segments sounds like paperwork. And it might feel like Big Brother is looking over their shoulders; or worse, micromanaging their activities.

The key is to evaluate the current process for getting a quote done. For example, if you have a complex product which requires engineering and your sales team is used to working in Excel, then fully leverage this tool. Use the ability to link up multiple worksheets to allow for an automatic generation of those cumbersome billing forms, purchase requisition forms, forecasting reports, project manager budgets, the actual customer proposal letter and diagrams, etceteras. Make it so the person using the quote tool, gets as much the other work done as possible by simply doing it once up front using your tool. Then while you are at it, create an output worksheet which traps the market segmentation and pricing content you need. Further, make it so that when they are done doing their part and they send it to the corporate office, there is someone who is more details oriented available to make sure all the paperwork is then routed to all the affected parties. Also, get those affected parties to provide their requirements for the forms being automatically generated by the proposal tool. As long as they don’t get carried away with things in the worksheet that would be nice to have. If the rep used to have to send multiple forms and paperwork to a lot of different people, then not only have you made their job easier by automating paperwork, but, you are able to streamline their process of communications.

However, no matter how intensively Excel is used in most companies today; if your sales reps are uncomfortable using Excel, a quotation process built on an Excel platform will not fall into the category of making things easier for them. This means you will have to be creative. There is excellent software which integrates into Salesforce.com. And, there are companies who write custom software applications that can be loaded onto a sales reps laptop or PDA. Further, there is now Enterprise grade pricing solutions available which can do all the above while providing better reporting for management.

The key is to understanding how your reps work. What are they are going to use? And can we make it to where their overall workload is reduced by using the one tool for quotation while also trapping market pricing and segment data?

Lastly, seeing the personal benefit of adopting either a modification to the existing process, or in some cases an overhaul, is critical to adoption of a sustainable market pricing process. Creating a process that makes life easier will get many of your salespeople on board. But, it does not address the fears of someone either telling them the wrong price to quote nor ease the feeling that Big Brother is looking over their shoulder. My recommendation is that if you are collecting pricing and market data and then creating pricing curves, then when you give the reps pricing guidance, share more than just the pricing answer of the day.

Regular communications of pricing trends in the market place in simple easy to understand graphical depictions will boost their confidence. For example, sending out a quarterly or monthly graph that shows hot ticket items’ pricing over the timeline giving the highest price per unit and the lowest pricing per unit by market segment, geography, or other relevant business metric will show them where their information is going and how it is being used. Plus, it will help the rep see how the guidance you are providing is based in their reality. By providing quality pricing advice, you will be increasing the salesperson’s confidence and making sure they have the right price to offer; which will translate into the likelihood of closing their next sale. This will not be perceived as meddling.

In conclusion, companies who do not methodically track market pricing by understanding what pricing wins business by market segment will be at a severe competitive disadvantage. But, making sure your sales team does their part means you may need to get creative about how to get the information you need. It also means that you will need to take pains to help them reap immediate tactical benefits through easier processes. Then later, they will appreciate your sharing the information you are gathering about their market and how they can win.



About the author

Patrick J Taylor is a business and process improvement expert. Driving bottom-line results through focusing on pricing related. With 20 years of experience in both international and domestic engagements, he is now Managing Director of Strategy Process and Analysis LLC, an independent consulting firm.

Contact Patrick at +1-214-629-8383 or pjtaylor@strategyprocessanalysis-llc.com, or learn more about what Patrick can do for you at www.strategyprocessanalysis-llc.com

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