Business Leaders: Are Your Sellers Leaving Pricing Dollars On the Table?

…And if so, how many missed dollars do you think it adds up to???Stop reading for a moment and write down your personal estimate.??Make a note to get estimates from your entire executive leadership team (ELT). I tell you what: have them each prepare their own estimate before your next ELT meeting, and as one of your agenda items, build a consensus estimate.

During that meeting, help everyone do the simple math:??every one of those dollars (or Euros, Crowns, Kroner, Pounds, Yen, etc.) will drop straight to your company’s bottom line as profit.??Your costs don’t change a bit in response to any price change. Discount dollars are profit dollars.??

Now, compare the financial impact of achieving more optimal pricing against any other initiative your executive team has even daydreamed about in the last five years.??Without even hearing the details, I'll bet it’s worth some leadership attention to figure out how you’re going to capture more of those foregone profit dollars.

It’s strange, isn’t it???So much of what captures those margin dollars happens outside your company walls, and above the top line on your financials.??And yet it’s all in your control.?

There’s No Such Thing as Pricing Power

There’s only?pricing permission.??That's true even in today’s inflationary environment.??Take “pricing power” out of your company language and culture, because it’s a myth.

Customers have a long memory for arbitrary/unwarranted pricing actions…and get very creative about seeking retribution.??Right now, we're experiencing a temporary increase in ability to “pass cost increases along”, but without wrapping those price increases in value earned, it’s dangerously easy to create customer resentment. Not only that, but that temporary window is starting to close.

From this moment on, only your executives are permitted to use the phrase “pricing power" selectively with investors and stock analysts (who learned the phrase in MBA school, and don't like letting it go), and then only with caution.??If your customers ever listen to your earnings calls, maybe you want to start using “pricing permission” everywhere.

You Earn Pricing Permission By Delivering Value

This truism conceals so much, because value only exists in a customer’s mind. That is, delivering value isn't about what you do as much as it's what a customer perceives.??The gap between delivering value and gaining permission can be huge.??

The trick is?getting your customer?to go through a process that includes:

1. Understanding what outcomes you help (or helped) them achieve.??That is, connect their own outcomes to your solution in a cause/effect relationship.
2. Measuring those outcomes.??Quantify them.??“You’ll help us reduce X risk” (where high performing salespeople excel) is never as compelling as “we spend $Y on X risk every year, and you’ll help us reduce that $Y by Z%” (what elite sellers do.??Every time).

You Better Know What Value Is

Value is a couple of things:

1. Only in the mind of your customer.??If you achieved an outcome for a customer, but that customer hasn’t connected it to you and acknowledged it, you have no value.??You will also have no pricing permission.
2. Different for every customer.??Even if it looks the same from one customer to the next, you have to build it in every new customer’s mind from nothing…from a base of “no value exists between this customer’s ears yet”.
3. Only related to their outcomes.??It has nothing to do with your features.??Absolutely nothing.??It has less than nothing to do with your costs.??Since it has so much to do with their outcomes, you better be good at figuring out what outcomes they’ll pay for.??Business acumen – understanding your customer’s business in ways they don’t -- goes a long way, and is often foundational for many selling organizations (I have a 10 question diagnostic to identify whether you operate in such a business).
4. The upper limit of what a customer will pay in the medium-to-long term.??Value lies at the core of pricing permission.

If you’re going to capture those margin dollars, you need to be a company who knows how to deliver value, but also one who knows how to uncover it, and one that helps customers perceive it, and connect it to your offer(s).??

Where Should You Focus Your Energy In the Next 100 Days?

Why 100 days? For starters, check what day that is when you read this. It's a pretty significant time of year from the day this article goes live. Second, a 100 day sprint is enough time to get a lot done, but not enough time to afford procrastination.

If that “available margin/profit dollars” number is as high as I see at most companies, it’s very apparent that some of your energy should be devoted to how you’re going to start capturing them.??Spoiler alert:??it won’t be by ordering your people to “get better at this!”

In 100 days, you should be able to diagnose the weak spots in your “value selling and pricing” system, identify what you want to do to shore those spots up, and (depending on your company size and scope) make a strong start at making 2023 the year you started turning value selling and pricing into a strength. Heck, you should even be able to capture some value-based pricing on those all-important end-of-2022 deals.

I can get you kickstarted with a great book,?Radical Value.??If you're in a rush, ask me for the summary. I’m also happy to help you understand what that 100 day plan might look like..for you.?Contact me.

To your success!