BI Consulting recently contacted a number of pricing leaders in various industries just to check in and get a better understanding of the key challenges they currently face. While not an extensive survey, there were no real surprises and a number of common themes are clear.
Most challenges are outside of individual businesses control and relate to costs pressures (inflation) and the uncertainty around supply chain.
For businesses supplying contracted customers at prices agreed long ago this results in some very tough (re)negotiations. Adding price increase conditions in agreements is a good way to mitigate this challenge but, unfortunately for many, it’s a little late.
The resulting pressure on sales to raise prices is tremendous and many are unequipped or inexperienced in dealing with volatile cost and supply, struggling to explain the situation to customers leading to requests for increased discounts instead to offset increases. This of course is counterproductive.
Of course, the obvious advice is to focus on value selling and customers willingness to pay in an attempt to successfully implement new pricing. Unfortunately that is easier said than done. Feedback suggests that customers willingness to pay has changed significantly as cumulative cost pressures build, they are looking for any relief they can find. Past buying behaviour (elasticity) is not always reflective of the current situation.
Implementing Value Based selling has its own challenges, as it is a major change to the way a business operates key commercial activities. A full change programme is required from the board down to front line staff and is not the work of a moment. Training for all key people is required not just in sales but in product management, marketing and the support functions.
BI Consulting has helped many organisations develop new approaches to pricing, especially the change of focus to value based pricing and value selling. If you would like to discuss strategies or would like additional pricing support for your organisation, do get in touch.