Commercial Vitality & Pricing Momentum
Guillaume Alexandre, Director at Pearson Ham, explains how to get businesses through the winter with a healthy pricing agenda
ISSUES WITH THE CURRENT ENVIRONMENT
“When a war breaks out, people say: “It’s too stupid; it can’t last long.” In La Peste, Albert Camus described how we collectively go through a succession of stages, starting with ‘denial’, moving on to ‘facing the realities’ of the situation and then going through a long, slow, ‘heavy’ and darker experience. His novel might be an analogy for the present pandemic. The prolonged experience of restrictions and economic troubles is surely affecting companies’ and teams’ morale.
Even resilient organisations and teams are experiencing the pervasive negativities of the environment
Many companies have experienced bumpy and patchy sales throughout 2020. Many of them do not know how to interpret accurately their current revenue performance vs. last year. No wonder 2021 revenue forecasts and demand estimates are a little vague and uncertain. Some companies are worried about economic difficulties experienced by their clients. Some observe a general cautiousness amongst all market players and even their own teams are leaning towards a general wait-and-see attitude.
A lack of pricing momentum throughout the organisation may go largely unnoticed
The phenomenon is all the more dangerous for companies as it is not spectacular at all: It can affect a company’s pricing ambition progressively, without any major crisis or turning point. “The truth is that nothing is less sensational than pestilence, and by reason of their very duration great misfortunes are monotonous”. It might just start with the inner or outer expressions such as “uncertainty”, “exception”, “abnormal”, “disrupted or inappropriate market conditions” gaining traction in analyses, reports, informal discussions, or management meetings. It can easily lead to unchecked, quick-to-jump-to statements such as “everything is exceptional this year”, “like everyone, our clients are negatively impacted by the crisis”, “this is clearly not the year to launch this”, etc.
Companies are at risk of coming out of this period with weaker margins than they should
A combination of commercial procrastination and apprehension can sap your P&L, when it comes to defending the value of your offering, asking more from the market, or maintaining the consistency and integrity of discounting policies. A lack of commercial vitality and pricing momentum can erode companies’ results in the short term but also surreptitiously impact long term performance, as teams are absorbed in budgeting and planning activities. “The habit of despair is worse than despair itself”.
RECOMMENDED APPROACH
Leaders should watch for signs of poor pricing vitality in their organisation
To what extent do budget plans reflect the market potential of the business? To what extent are teams ready and equipped to deliver more value in the coming months? Some early signs may be found in simple anecdotal observations. For example, in the tone and content of internal strategy and performance reports, or in the lack of facts to support new suggestions of market repositioning. Or when sales teams forward client requests internally with no filtering nor strategic interpretation. A robust and fair “Pricing Vitality Assessment” should combine a critical review of internal activities and plans with a fact-based analysis of market conditions.
A series of initiatives can help leaders drive the pricing momentum and commercial vitality of their business
The following themes should be considered by management willing to break away from the dangerous inertia of the current period:
Value Proposition & Pricing Development
How dynamic is the new product development and commercial offering design pipeline? To what extent is the product agenda aligned to detailed pricing strategies? Are NPD and pricing plans driven by a shared strategic vision? Are pricing structures and commercial models effectively designed to support value selling, positioning, price increases and upsell objectives?
Market Leadership Initiatives
To what extent has the organisation got clear ambition and well-crafted plans to act as a price leader and set market development trends? Is there a sufficient pipeline of commercial bets across different teams, market segments and time scales? Are plans well supported by collective work and structured preparation of all market communications?
Customer Facing Team Delivery & Pricing Dialogue
The dynamism and mental strength shown by front office and field teams is probably more important than ever. Are teams equipped with compelling sales narratives, freshly designed commercial tools, innovative commercial approaches? Are they mobilised around company-wide initiatives and teamwork projects? Do they have new offers and tools to justify and support customer relations? Are teams focussing on forward looking metrics and enthusiastically planning to challenge the status quo?
Special attention from senior leadership is required to drive price performance through this pervasive depressed environment and now seems a very appropriate time to launch new initiatives Waiting for recovery and overlooking the challenges of pricing vitality and governance is surely a recipe for regrets. Successful companies will start reviewing their situation and lead their teams towards higher performance. At Pearson Ham, we have our minds focussed on these renewed pricing themes and we help our clients deliver enduring results.
February 2021