Mirror Mirror on the Wall, Does the Team Get Our Value Proposition After All?
If you are a business owner or in the C-Suite, you probably understand the importance of pricing and its role in your profitability. We find that while most executives and business owners believe pricing is critical to their business, these same leaders sometimes believe pricing is either controlled by the "market" or limited to their cost structures and what they need to get paid to be profitable.
Therein lies the problem. Pricing is a mirror of the value created and effectively defended by the organization. So, if you, as a leader, are waiting on the market to confirm that value or a cost structure that supports that value, the price observed in the mirror is probably less than you deserve.
That's why at Price Space and Pricing Empowered, we teach that the number one most important indicator of pricing excellence is if the CEO or business owner is effective in 3 areas:
1) They must get the entire organization aligned on where both price and value currently are relative to the market
2) They must articulate with confidence where price and value will evolve in some timeline and...
3) They must provide the resources necessary for the evolution to occur. We often find leaders overestimate their jump-off points in each area. When leaders have false confidence that their organization understands both where they are and where they are going in valuation creation and pricing excellence, profits suffer significantly.
So here's the kicker: all three of those activities are actually measurable. This is how we recommend you approach the problem.
1) Survey cross-functional teams in your company on where they believe the company stands in both price and value against competitive alternatives for each major segment of the business. See if the answer is consistent.
2) In the survey, ask how much prices are expected to improve in 2024 and how that is going to happen. Have the participants provide their opinions if your value proposition will support the pricing goals. And finally,
3) Reflect on your pricing process. How long does it take to create a price for a new product or turn around a proposal? Is that timeline measurably improving?
If you aren't focused on understanding your value and getting paid what you are worth as a leader, your teams will internalize that and not be as effective as they can be with customers. Take a moment to look in the price value mirror and decide if you could use a little straightening of your tie before you head out into the competitive world today.