Pricing – The New CEO Imperative
Are you one of the many C-Suite executives that have yet to be convinced that ambitious pricing transformation projects should be a high priority? Or, are you a pricing practitioner buried in spreadsheets and manual processes looking for a way to finally get some relief by way of pricing software investment, if only you could get the higher-ups to sign off?
Whatever end of this spectrum you are on, a new book, Pricing – The New CEO Imperative, is required reading. What makes this book, shepherded by pricing consultant Stephan Liozu, different from the sea of business tomes that are released in a given year? This one was written by the most influential pricing consultants and software vendors from around the world specifically to educate the C-Suite on the urgent value of pricing investment. For the first time, the most important voices in the industry worked collectively to make the case for pricing as the key function for profitable growth in our turbulent, and digital, business environment.
Liozu dropped by the B2B Reimagined podcast to chat with Zilliant Chief Marketing Officer Lindsay Duran about how this book came together, what he’s learned in extensive conversations with executive leadership, his view on the future of pricing and the pertinence of Zilliant’s chapter in the book. Below are some highlights from their conversation:
Q: We were very thrilled and honored that you asked Zilliant to be a part of the book. How many contributors are there and how did you go about choosing the voices that’d be a part of this?
A: One of my objectives was to be fair in inviting people, so I went wide and invited quite a bit of people. I encouraged people to jump on board because this is a once-in-a-lifetime opportunity to do something together. We ended up with 21 chapters from 21 different contributors and a good representation from the software space and some of the top consultants. I also have a chapter where I collected voices of practitioners – we have seven testimonials from vice presidents and directors of pricing about their experience in working with the C-Suite, as well as other experts from around the world.
Q: Our CEO often calls pricing “the last bastion of guesswork” in any business. Why do you think that pricing as a lever to improve financial performance has been overlooked by the C-Suite for so many years?
A: That’s a great question and that was the motivation behind this book. I ran 31 interviews with experts, and I asked them the same question. Even with so many stories of success, we’re often not getting listened to (on budget requests). I think it’s a combination of things. There are a lot of misunderstandings on what pricing is in the C-Suite, and there are also myths: “The market sets the price,” “I don’t control my price,” “Cost-plus is good enough,” etc. At the same time in business schools, pricing is still neglected, it’s not an elective that you find often. Then also, as pricing professionals we may not do the best job at convincing, at creating stories, at showing the true impact and risk analysis of doing pricing transformation. That’s the feedback that I got from CEOs, that they look at the investment requests and they don’t believe (the value).
Q: In Zilliant’s chapter, we look at how price is a leading cause of margin leakage but also the most effective lever to grow profits. Why does this gulf exist between performance and potential when it comes to pricing?
A: Well, you look at how many of the Fortune 500 have dedicated pricing teams, and it’s 20%. That means that 80% of the Fortune 500 do not manage pricing. As such, they struggle. They do it manually, they do cost-plus, they do it with sales or finance involved, and that fragmentation is a big issue. Until we have more penetration of the function of pricing in these organizations, they’re going to struggle with it. Now when they do have a function, a lot of the time you would have a global Fortune 500 company with just a couple managers running pricing. So, imagine $100 billion of business run with two managers!
Q: There has certainly been an uptick in the adoption of price optimization and management software in recent years. How do you feel about the current level of investment and what do you think it will look like five to ten years from now?
A: Frankly, I’m pumped up. McKinsey, Accenture, Deloitte, during the COVID crisis, came out with awesome papers on why pricing needs to be on the table more than ever. When you talk about eCommerce or optimization or new business models around subscription, for all the things that are necessary in the new normal pricing has to be front and center. Those are reports that are read by the C-Suite. This is why we timed the book to be out now because now we are recovering (from COVID) and you can see already the impact of cost increases and price increases and imagine if you have to raise your price five times in six months manually, some people are going to get some gray hair there. I predict an explosion in pricing technology adoption.