Pricing Leadership

On a recent project I did a “Day in the Life” with Mark*, a sales representative responsible for selling animal health supplies to rural feed and farm/ranch supply stores. Seeing my customer’s sales force interact directly with their customers provided valuable insights that augmented the discussions we had already had with the corporate pricing team.

For example, our customer was trying to phase out a product from one of their suppliers and switch over to another, higher margin supplier. They had significantly altered the sales forces’ incentives to encourage sales to make the move. I got to see the effect first hand when Mark attempted to convince a skeptical cowboy to try a couple of boxes of the new medications. The store owner in question was not sure he could convince his customers that the new medications were just as good as the old ones. We learned that changing sales force incentives quickly and effectively changed sales representatives behavior, but the sales reps were having trouble convincing their customers to change as well.

Mark and I discussed a wide range of pricing related topics as we travelled between the tiny towns he covered. We discussed his incentive plan and he offered specific examples where it was in his best interest to drop margin as low as possible to get revenue. We visited a store where he had previously received good business at a high margin until a competitor had come in and driven him out with below breakeven pricing. Mark showed me his company’s order entry system and the pricing system that supported his pricing decisions, and suggested some improvements that would help him price faster and better.

In addition to the wealth of data that Mark had to offer, the Day in the Life also provided me with valuable perspective. Viewing a list of products takes on new meaning after you have helped sell a few; as well as hearing about a frustrating customer makes more sense when you have actually met one.

I brought those pricing recommendations back to corporate IT and we incorporated several of them in their updated sales systems.

*Name changed to protect privacy

Initial results are back from our implementation of PROS Scientific Segmentation and Pricing Guidance at a major health products distributor. PROS prices were rolled out in the field in mid-April and the entire sales force adopted PROS prices since the last rep went online about two weeks ago.

• Results so far: 130+ basis point improvement
• Translation: $8 million+ annual revenue improvement – this is just the start

Previously, these guys manually researched and targeted specific prices, but PROS offered optimized prices for all customer and product combinations at the same time. PROS advanced science also augments the initiatives they already had in place. If they had previously set a floor price for a product in a certain region, they are now able to recommend a scientifically optimized target price for the sales rep as well.  Their early experience with pricing actually lead them to work with PROS given our unique expertise in B2B pricing science.

One lesson you can learn from this implementation is that the sales reps help determine whether the pricing initiative succeeds or fails.  This is always true. One of the sales managers here actually instructed their sales reps to ignore the prices and caused some real margin damage. We caught this early, and offered PROS generated prices as “recommendations” while also aligning sales force incentives with the new better pricing and closely monitored results.  We were able to work as a close partner here and collaborate directly with the sales reps to make sure user adoption is high and the results are on target.    

This customer couldn’t be happier with the uplift and we’re looking forward to even better results as we continue the partnership.