Pricing-Newsletter No. 76 (2023): What do In-house Pricing Workshops Bring? Building More Pricing Competence in the Company!
Dear readers,
The pricing competence of managers must be much more in the focus of management development (see also my newsletter 64). My empirical studies prove it again and again: there are only a few companies that systematically make strategic and operational pricing a topic in management development. After all, pricing is a core task of management: it is about achieving an appropriate equivalent for what is created in values for the customer.
Enjoy the following reading
Your Prof. Dr. Hans-Christian Riekhof
Make pricing competence a building block of management development!
It’s been a while since I’ve been dealing with management development as a main job, first as head of personnel and management development of an international corporation. As a side result, my (now in its 6th edition) book “Strategies of Personnel Development” was created.
Later, as an operational business area manager and managing director, I selected and approved the corresponding management development programs with the executives and managers of my area of responsibility, combined with very individual development programs.
Pricing competence: much too rarely a topic in management development
I must confess at this point: The pricing competence of executives played no really relevant role in this context (as in most companies). After all, pricing, as you know as a regular reader of my pricing newsletter, is the decisive profit lever, the effective use of which all (prospective) managers should master.
Pricing is also about correctly assessing the value of the company’s own services for the customer, and this is ultimately a very central task of the entire management – and not just about the marketing and sales manager.
Pricing competence: the individual and the company-related dimension
I distinguish between the perspective of the individual competences of managers in pricing and the perspective of the organization: companies as organizations can also build pricing competence. This organizational pricing competence is then expressed in the strategic orientation of pricing and in the (hopefully professionally organized) pricing processes.
Examples of high organizational pricing competence: Amazon and Zara
Two practical examples at this point: Amazon has undoubtedly realized an extremely professional online pricing – and by no means strives to always be the cheapest provider. We analyzed the pricing strategy of Amazon with other competitors for a trading company some time ago in an empirical study over several months: the professionalism of Amazon can be observed very nicely there.
Many online retailers are miles away from the professionalism of Amazon pricing in their pricing processes. The Spanish fashion chain Zara, as a vertical provider of fast fashion, has also built very intelligent pricing processes, which leads to a clear superiority in the offer and a very high profitability.
High process-related pricing competence at Amazon.
Source: © iStockphoto
Today I am concerned with the individual level of pricing competencies: how much do managers understand about pricing, i.e. about the development and implementation of pricing strategies, about the elaboration of pricing roadmaps, about pricing research, about pricing audits, about the levers for implementing pricing strategies and about building effective pricing scorecards? Learning takes place (hopefully) always and everywhere. Even though one might think that it has gone out of fashion: I personally acquire a lot of know-how through reading books. The great advantage: you are not tied to a location, and you can determine your own reading and learning speed (unlike the typical podcast, which dictates the learning speed for me much too strongly – most of the time it is much too slow for me). My most important tool when reading books: the pencil. You can see quite well in my bookshelf which books I have really dealt with.Management development: how and where do executives learn most efficiently?
Reading books: practice early if you want to become a master. Source: © iStockphoto
In addition, reading books trains the most important muscle you have: the brain. So offer your brain enough training opportunities … However, books on pricing are sometimes quite theoretical and not easy to digest (that’s why I keep my pricing newsletters quite short).
The Pricing Newsletter “Riekhof on Pricing” can be found at www.unicconsult.com/pricing-newsletter
If you are still looking for some book tips for your personal (management) development: you can find over 60 recommendations HERE.
Acquiring individual pricing competence in a seminar: the classroom training
Admittedly, reading specialist books is not everyone’s cup of tea. So what are the alternatives? First of all, there is the classroom training on pricing, which is primarily what I am concerned with here and which we also conduct online. Classroom trainings on pricing are available as open seminars, where participants from different industries share their experiences. Such a seminar can very well lay the necessary foundations – this is the compulsory exercise for (aspiring) managers, where it is all about the basics.
In-house pricing workshops: Pricing as a horizontal, cross-functional process
The company reference becomes much more concrete when the pricing seminars are organized in-house. It is important that you involve all relevant functions and areas – after all, pricing is a horizontal process, as the following illustration shows:
Pricing as a horizontal process in the company.
Photo: © UNICconsult Strategy Development
In an In-house Pricing Workshop, ideally all affected functional areas or departments come together: sales and marketing, product management and product development, controlling and finance, customer service and after sales.
Who are pricing seminars conducted for?
Source: © PFH-Pricing Study 2023: Pricing Processes in Business Practice – Riekhof/Breustedt
This is important, because pricing is to be understood as a cross-functional process in which a pricing strategy is jointly developed and then vigorously implemented in everyday life. And the profit potentials are not “calculated” by an external consultant, but determined by the management team on the basis of their own research and analyses bottom-up. It is obvious that a much stronger commitment is generated in this way.
The most important result of the in-house pricing workshops: Pricing mindset and pricing quick wins
In-house pricing workshops are an ideal starting point to
- change the mindset for pricing in the company sustainably
- develop a common conceptual understanding for pricing
- realize profit-increasing pricing quick wins
- bring pricing competence into the company
- noticeably improve the company’s return on investment in the medium term.
The result dimensions of pricing projects
Source: © UNICconsult Strategy Development
In-house Pricing Workshops: Business Driven Action Learning
An important principle of all our pricing seminars as well as the in-house pricing workshops is to always establish a concrete reference to the business of the participants: the participants work intensively on the pricing strategy for their own area of responsibility. As part of a two-day pricing workshop, each participant will make an estimate of the profit potentials of a price strategy oriented towards three years. The term “Business Driven Action Learning” describes very well how we proceed.
The advantages of the in-house pricing workshop: cross-functional cooperation
The focus of the in-house pricing workshops is on the concrete pricing strategic questions and challenges of the company. A common conceptual framework – our RSEC model (cf. Pricing Newsletter No. 2) – ensures that discussions are quickly brought to the point. Price-related hypotheses are developed and later empirically validated.
Price strategic statements are thus placed on a valid foundation. The 6 levers of strategy implementation are then discussed, which ensure successful implementation.
Self-development and mentoring: principles of management development also in pricing
Management Professor Fredmund Malik has put it in a nutshell:
“In the final analysis, people can probably only develop themselves. … Practically all real performers in history were self-developers. … They oriented themselves to role models, whom they emulated. To a much greater extent, they had mentors, people who encouraged them to become active where they had their strengths.”
F. Malik, Lead. Perform. Live 2000, p. 248
Building Pricing Competence: Assigning Large Pricing Projects
The most effective way to build individual pricing competence is certainly learning on the job. Anyone who has dealt with the pricing strategies and pricing processes of a company and perhaps even optimized them in the context of a project develops a deep understanding of the interlocking of the pricing processes, the effectiveness of the pricing strategies, the success control with pricing scorecards.
To put it again with Fredmund Malik:
“People develop with and at their tasks.” …
“The task must, if it is to be developmental and promoting, meet some requirements. It must be larger and more difficult than the previous task. … It is indeed possible to overtax people; but it is not so easy.”
Fredmund Malik, Lead. Perform. Live. 2000, p. 250 f.
So the aim is to formulate high expectations and offer your young talents the opportunity to tackle new and above all larger and challenging tasks in pricing. A mentor at their side is certainly a great help. There is little to learn in rigid routine.
So much for the topic of individual pricing competence. In one of the next pricing newsletters, I will also address the pricing competence of organizations again.
With best wishes and until the next pricing newsletter – and maybe we will see each other soon in one of my open pricing seminars or in-house pricing workshops?
Your Prof. Dr. Hans-Christian Riekhof
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