With the success of PROS’ Global Leadership Seminar Series along its stop in Shanghai, China, Robert Rutledge, who leads Accenture’s Pricing & Profit Optimization practice in Asia-Pacific noted, “Manufacturers in China today face low-cost competition from places like India and Mexico and design and engineering competition from Japan and the west.” The seminar focused on the tremendous opportunity for manufacturers in China and across Asia-Pacific to adopt advanced pricing strategies and price optimization software to remain competitive and profitable in an increasingly global manufacturing landscape. Mr. Rutledge continued, “In order for Chinese manufacturers to maintain their competitive edge, they will increasingly turn to more robust pricing strategies such as those supported by PROS’ industry-leading price optimization software tools.”
Below are two video clips of Mr. Rutledge’s presentation which the discuss the topic of Cost Plus as well as a Case Study focusing on how Chinese manufacturers can evolve from basic to more sophisticated pricing models, including pricing strategies in manufacturing and a compare and contrast with other Asian countries.
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.
As more and more companies are looking at pricing, they are asking themselves, “what can we do to jump start the process?” Ultimately, it’s understanding how you price.
On each of our implementations, PROS conducts a “Day in the Life” of potential users; we call this “riding in the truck” as a reminder – because we actually rode in the sales truck of one of our customers! This is the only true way to fully understand how, empathize with, appreciate the pains, and absorb the pricing practices of those users. If pricing is such a strategic lever that can make a significant difference in your profitability, shouldn’t you be willing to invest the time to understand all the corners of your organization’s pricing practices in order to squeeze out as much ROI as possible?
The question is: how do I conduct these Day in the Life sessions? I can start by telling you what not to do… don’t just ask questions! Put yourself in your employees’ shoes… if they are called into a room, and must answer a bunch of questions about how they do their job, what do you think they are imagining? No matter how you prep them, how you preface your message, or how you triage any malcontent, they will be nervous. Unfortunately, that feeling will result in them answering the questions they way they “think” you want them to answer. Anyone can put concepts on paper, which is what their answers will no doubt provide; you are trying to get at the dark and ugly truth about price and profit leakage. Therefore, take the “interview” to the next level… go ride in the truck.
But don’t just observe in the “white lab coat, clipboard, and one-way mirror” sort of way… observe AND interact. Ask “why did you [insert activity here]” until you fully understand – don’t assume anything. Then go beyond observation and interaction: solicit their feedback for how they would improve their processes. What else do they need? What could they do without? What typically causes them to sit around and wait for three days while your competitors steal your business? Get them to believe they will have an impact on the outcome, the new process that they will be asked to follow… BECAUSE THEY DO! Once you have this buy-in and belief in your employees that you want them to do better and are willing to give your time and efforts to help them, the truth comes out. It’s only then you can work with your cross-functional team to improve your pricing processes in a way beneficial to all… because you know how your organization really prices.
True, leading-edge companies already have this figured out as they are investing in pricing for the long-haul. They are looking at the support mechanisms, training programs, and business policies that must be enacted in order to have a successful pricing initiative. This is not simple and it takes various business units agreeing to change for the mutual benefit of the company. After all, if it were simple, the company would have already figured it out and pricing would not have the immense returns that we have seen time and time again.
Have you considered how performance management and price optimization are related? Performance management is a technique used by many executives to manage both behaviors and results. Pricing has behavioral implications for your customers and your sales managers. The changes in behavior resulting from pricing policies, internal and external, can have a large impact on your bottom line if managed properly.
PROS is an active member of the Professional Pricing Society and Doug Fuehne, VP, PROS, will be presenting a live webinar on this topic in cooperation with PPS on October 6th at 12:00 noon EST. For more information check the PROS webinar calendar: http://www.prospricing.com/webinars/
Webinars are for PPS members only, however Pricing Leadership blog readers can use the below special registration to attend the webinar even if you are not a PPS member: https://www1.gotomeeting.com/register/900702721
One more thing…did you ever take a PROS Pricing Excellence Certification Course? If you did, you now have the opportunity to transfer these credits to the Certified Pricing Professional program from the Professional Pricing Society. Contact PROS atinfo@prospricing.comto request a credit transfer.