Episode #0063 - How much should a CEO know about pricing?

As they say - a fish rots from the head down - and if a CEO is not on board with a pricing project it is doomed to failure.   What should a CEO know about pricing - and we do not suggest they should get into the detail with pricing sheets!   In today's episode we want to ask the question, What should a CEO know about pricing? I'll preface this by saying, obviously in a big company CEOs have one of the toughest jobs. One of the best-remunerated jobs but also one of the toughest. But the question is, what should they know about pricing? In an environment where they have to know a little bit about everything. What really should a market-leading profit-driving CEO know about right the sector? I think the first thing they should know is that pricing isn't a tactical numbers game. I think the pricing is a great way for them to get closer to their customer base. To deal with very difficult market challenges, competitive tension, margin pressure price, pressure pressure. It's a great way to galvanise teams to work together to align initiatives from sales, marketing, supply and pricing. So that you get the most out of each price and capitalise on your business and pricing models. I also think it's a great way, and here's a classic a CEO should know that pricing is their number one profit lever if used correctly. Yes, that's it. From my experience, a lot of CEOs are extremely good at talking. They're very good at talking. But in some context from my experience also they're not so great at listening. You can't be an expert in all areas. To build a value culture in a business, a great business culture where you understand, What the company's doing? What the company is trying to sell to which customer? What the value is? What is the charging model? Why do people choose you above a competitor? That fundamentally is pricing. No one expects the CEO to be able to drill through. Or have the time to drill through a pricing sheet or an optimisation sheet or those sorts of things. But you do want them to be considering, is it a rental model? is it a pay upfront and then you're locked into an ongoing business sort of model? what is the discounting mechanism? Are you up for tendering? Fundamental questions about the business strategy are, what they should know and what they should be interested in and engaged with? From working with several CEOs and their teams now. I think an epiphany moment for many CEOs has been that pricing is not just an event. It's an ongoing transformative process. It's a process of continuous learning. There's a lot of trials, there's a lot of error, there's a lot of mistakes are made. But they're also managed. I think at the beginning of any pricing journey that's just sort of like rhetoric. It sounds deep. It sounds meaningful. But once they're going through the process. It becomes something that resonates. And it's like, "Oh yes, I get it". From there everything, we've just discussed is value and pricing being that connection point to supply-demand customers makes sense. Also, it raises other questions such as now I understand pricings or processes. Have I got the right strategy? what people do I need to drive this forward now I know it's a process rather than just a tactical excel spreadsheet game? Whatever I've looked at a consulting project or any sort of project in pricing and you think, how successful is this project going to be?  The biggest deciding factor for me is generally how engaged is the CEO. If a CEO is super-engaged in championing the project. Backing the project. Raising it every meeting. Pushing it forward it's a very high chance of being successful. If the CEO is not even involved, not in meetings. Delegated to somebody below him or her who may not even be a direct report to him or her. I'll be honest, the chance of success is low. The CEO needs to champion the culture they are the person most responsible for the culture in the business. The old saying is that a 'fish rots from the head down '. If the top people are not engaged pushing stuff, providing guidance, providing the culture, the objectives, etc. Things will not go in the way that you want them to go in. People at lower levels, they'll work through the politics. They'll work through how that works in any organisation. The bureaucracy people generally do what they're paid and incentivised to do. If they're not paid and incentivised to work as a team. To work towards business profitability to objectives of that nature. They won't do it. They will do what they are incentivised to do. And so, without the CEO backing, the CEO championing. A bit harder word to say than I thought it would be. Without those aspects, I think it will fail. So my big thing is, how engaged is the CEO? are they aware that they own the profitability of the business? It fundamentally is their responsibility. I think that's a great point. From my experience consulting on pricing and pricing teams, what I've learned is that when there's a burning platform, CEOs become engaged. The burning platform tends to be either board pressure or a change or shift in the market, competitive pressure. Or their peers are doing something they're not doing, or they need to make money. So, money is a major driver. Pricing is the best way to get there. Internalising that expertise will deliver that full economic value from the pricing that you want. If you want to learn a little bit more about that. Just see where your businesses are in terms of being able to deliver the ROI from pricing that you want. Feel free to contact us, you can visit our website at Taylor wells.com.au. Click on download or your free pricing audit or contact us directly for our initial briefing session. We can just talk through some of your initiatives. See whether there are places that we can help or a roadmap in place that would benefit you and things like that. I think just one final point I'll make and this is from some of my previous experience working in businesses. Pricing is a tough job, it's a tough gig. You're constantly getting a bit of pressure from your customers. You're getting pressure from internal operations. Sometimes you're seen as everyone's enemy. You're seen as trying to push up prices for the customer. And trying to sometimes decrease pricing or discuss that aspect with sales teams and marketing. That's a tough gig, and sometimes you can feel that you've got no friends in the business. If you're a B2B pricing person, you come back from a meeting and you might have got a deal in. But you may get smashed when you go back to the office. The other stakeholders in the company may not be very pleased. You need to have confidence that the CEO has your back. That the CEO has supported you and that you're aligned and you're on the same sheet. If that's not there I think pricing can be very unsatisfactory. Sometimes it's heading to nothing, one way of putting it. So yeah, I think we'd leave it there. Fundamentally, if you're doing a job you need to be aligned with the most powerful person in that organisation. Yeah, pricing is not just a quick fix simple price optimisation process. Or as easy as getting some silver bullet pricing software solution. It's a process. It's based on a value culture. And, it's very heavily reliant on both people strategy and systems. Good CEOs that sponsor projects based on that premise do very well. They do it very well consistently and over time. CEO's don't consider it as a tactical move. Make some money over a short period of time and tend to lose it, very quickly too. So yeah, as I say, feel free to get in touch to get your free pricing audit, and we can help you.