All right, hello, and thank you all again for tuning into
another episode of the Professional Pricing Society
podcast. My name is Terrence and today
we're going to be discussing the top three levers for building
pricing power. And our special guests we have
today are Adnan Akbari and Tong Yang, both withholding Advisor
advisors. Adnan has 20 years of experience
in consultative and in house roles across energy management,
technology and insurance, leading growth initiatives
within Fortune 500 companies focused on building pricing
organizations, service offering, development and sales strategy.
And he also has an MBA from the Tepper School of Business at
Carnegie Mellon University. And Tom Yang, a senior pricing
consultant. And his expertise is in
strategic pricing analytics and project execution with
experience across manufacturing, distribution accounts and
software. He also has an MBA from
Weatherhead School of Management at Case Western Reserve
University. And gentlemen, how are we doing
today? Doing great, excited to be here.
Excellent. Good, good.
Super excited to have you both and you guys are going to be
conducting this discussion ahead of your upcoming session at our
Vegas conference is going to be taking place this October 22nd
through the 25th. Super excited to have you both
at our pricing conference coming up in the fall.
To learn more about that, you can visit our website,
pricingsociety.com and visit the conferences tab or let's go
ahead and discuss the top three levels for building pricing
power. It's such an interesting topic.
I'll go ahead and jump into our our questions and our
discussion. How would you both define what
pricing power it looks like? I love this question just
because it there's so many tentacles that come about from
this. When we talk about, when we hear
about pricing power, the the natural interpretation.
I think one of the things that Warren Buffett had previously
said was if you have a business that has the ability to raise
prices without losing customers to a competitor, that is
indicative of you having pricing power.
And I'm paraphrasing a little bit there.
And generally speaking, that makes sense.
But the challenge tends to be, OK, you raise prices, you've
done it once and you know, perhaps you're, you're, you're
not going to lose any customers. But the, the real question to me
is how do you build and sustain pricing power over time?
And that's, that's a vastly more complex answer.
And what we often advise our clients and communicate in the
market is that to truly have pricing power and to build and
sustain pricing power, you need to continually offer incremental
value to your customers. And therefore you would then
have the ability to increase prices because it's a fair
exchange. Then you are you are offering
incremental value in exchange for for more price.
But the question of how to do that is significantly more
complex because in order to continue to provide your value,
your broader organization has to work together like a well oiled
machine with the intention of increasing pricing power and
therefore realizing growth over time.
Anything add there Tom? Yeah, that's totally agree.
And I think really it's about how to build a sustainable
profitable business over time. By having pricing power you are
able to do that at having long term success.
OK, good, very good. Now, you know, you mentioned
that adjusting prices without understanding pricing power has
a potential to lead customer churn, kind of dive a little bit
deeper into this. What does that exactly mean in
your opinion and how can you elaborate more about this?
Yeah. That's another super interesting
topic because, you know, we talked to a number of different
companies out there. And particularly at times like
now where things are somewhat volatile, meaning that there's a
lot of companies out there that saw a significant upswing via
the after effects of COVID, perhaps due to things like
supply chain constraints coming out of that.
So they had the ability to really grow their business and
price was a lever that they had historically pulled.
And now we're seeing some of the after effects of that where the
market's like, well, you know, there's been some historically
larger increases and perhaps there was more willing to pay
because of supply chain constraints and things are
starting to normalize now. So the the question, the the
core of the question that often comes about and the reason we
often reference churn is because the number one risk when you're
going in and trying to capture the level of pricing power that
you have via price changes is are we going to lose customers?
How much of A risk is that? How do we manage our business in
such a way where, yeah, we know that we're charging fair value
for what we have, but at the same time, nobody likes to pay
more for something that they previously paid a certain amount
for. So how do we navigate the waters
in such a way where we're minimizing that risk of churn
and then growing that symbiotic relationship friendship with
with our customers. And to us, it's a matter of
going in and under one, understanding the pricing power
you have by understanding the total value that you offer your
customers and then creating a right price structure and kind
of that right organization that is centered around value.
So you can minimize that risk. And then the last piece is being
able to come effectively communicate that in in the
marketplace because I think that last element is where companies
realize that they are highly differentiated, but their
customers may not fully realize it.
So then you have to go in and make sure that you are
effectively communicating that value.
So and all of those things come together through an effective
pricing strategy that can really start to minimize that risk of
losing customers. I think add a little bit more.
It's about your ability to set price confidently and ability to
set price that is, that is that fits the market well.
And if you have good price setting and confidently setting
your price, you should be able to not have those issues that
you just mentioned where there's customer churn and things like
that. So that's a part of
understanding how to set the price, is part of understanding
your customer, understanding the market environment, things like
that. OK, understandable.
Now, when you when you consider pricing power, how can companies
assess their pricing power versus things like their market
alternatives? Yeah, I think I can take that
one. So if you pricing power is
really about understanding your differential value and creating
differentiated value and then also being able to execute on
that to execute your pricing so that you can capture those
different that differentiated value.
So part of how to assess this really is about looking within
your organization and also looking at the market.
So if we look at it back into looking within your
organization, there are certain things you could do.
So things such as introspective questions like how well do I as
a organization understand the value that I'm providing to my
customer? Can I quantify it?
Can I identify it? Does everybody in my
organization understand that? And the next piece is your own
data. So sales data, transactional
data is a wealth of resource in terms of helping you understand
yourself, understand how you stand within the market.
And then if you look outside at the market, you can always talk
to your customers, understand your customers through
conversations, through intelligent relationships.
And then also you there are market research resources to
understand the overall trend in the market to understand if the
industry and things like that. So I think we'll cover some of
this in our workshop later in Vegas.
Yeah, really, I mean, just 100% agree with everything Tom said.
And that the piece that I like to hone in on is when you're
going out there and assessing the pricing power that you have
in the marketplace, it's obviously going to be incredibly
important to understand how that stacks up relative to other
options out there, right? The most relatable off example
that is often spoken about is a phone.
And you can argue that, you know, let's just say that Apple
is the market leader, not knowing all the nuances of phone
industry. But I'm guessing that's a fair
statement. But the question is, how does
that value stack up to alternatives out there, whether
that's Samsung, LG, or the plethora of other options that
are out there? Because inherently a phone has
massive amounts of value. It's ingrained in everybody's in
people's everyday lives. But if Apple were to go out
there and raise their prices by 100%, there's alternatives out
there that people would start to give stronger consideration to,
despite the fact that 100% increase is below the value that
somebody is deriving from the use of a phone.
So it's incredibly important to understand what potential
alternatives out there and then understanding that at the most
granular level, meaning that how does that how, how might that
value vary across different customer segments, whatever they
might be within any organization.
OK, interesting. You know, in in conjunction with
with price of power and market alternatives, you also think
about the need for growth as it applies to strategies.
And so how should companies balance the need for short term
growth versus their long term strategies?
Yeah, Yeah, that's, that's a good question.
I mean, often we get engage with our clients, there typically is
some type of a burning platform, meaning that there is from
perhaps a process perspective they have, they just have
significant problems in executing price, arriving at the
price in say the right amount of time or they, they clearly know
that they are underpriced relative to the value that they
are offering in the marketplace. And they're like, well, this is
a problem that is, is devaluing our business, meaning that if we
were to fix this problem, the, the valuation of our business
would be stronger. So going in and being able to
figure out how best to change the price model on a one time
basis is often what we get called in for.
But that what that quickly turns into is like, OK, we get it.
We can put this structure in place.
We found this customer segment, we know how to communicate
effectively to them and capture the value that we have.
But then the question quickly becomes how do we do that over
time in a way that's sustainable.
We have all of these say product enhancements planned.
How are we, are we structured in the right way to make sure that
these product enhancements are truly what the customer needs
and that we can grow our business and recoup the
investments that we are making them via price, via growth by
capturing additional customers. So from a long term perspective,
that short term question is often about price.
But long term, again getting back to what we had said a
little bit earlier, it starts to bring in kind of these cross
functional groups within organizations where where people
are coming together, whether that's a product, marketing,
sales, pricing, etcetera. And that's where you start to
create long term value, create long term value with your
customers by working together as cross functional teams and then
putting something in the market that resonates with customers.
And that last piece is making sure that you have the structure
in place to capture the benefit of that via price.
So that's where that long term piece comes into play.
And it works in conjunction with just cross functional teamwork
essentially correct, not just pricing, but kind of everybody
on board. Yeah, OK.
We often see it as almost like a cultural change with an
organization. So we often see pricing is very,
I guess isolated group within the business.
They don't it's it's important to announce point to bring in
everyone inside inside the organization to be a part of
that. And another point I want to
emphasize is that over time piece your market will change,
your business will change, the amount of value you bring to
your customer will change over time.
So it's important to stay ahead of that and not have a pricing
that's static. Your pricing should be dynamic
and be responsive to the changes inside the market.
That's good. That dynamic piece I think is a
really, really good point because there's a few different
facets of that, meaning that it could simply be market forces
that are changing the value of what you are selling, meaning,
you know, 11 great. Maybe recent example is interest
rates are higher now and if you are playing in say the housing
market, because interest rates are higher, demand is slower.
So that's not really anything that's truly a function of the
business itself. Those are natural market
conditions that occur and there's fluctuations, but it's
really important to be able to take that into account so that
you take so that you know, OK, the market is being impacted and
therefore the growth in my company is going to be impacted
and making sure that you have that common understanding so you
can start to differentiate between the the market impact
versus price impact. So you're not taking any actions
from a pricing perspective that is is irrational.
You want to make sure that you are well equipped to hold price
when it makes sense and differentiate between market
forces. So you're going, you know,
discount for no reason or leave money on the table.
And inversely, I think the other piece that comes into play is
that over time, any product or service has a natural life
cycle. So it's important to understand
where you fall in that life cycle.
So you're implementing the right product strategy for that
specific product, meaning that, you know, something that's end
of life cycle that may dictate a different pricing strategy for
something that is emerging. But being able to be conscious
of that over time because like Tom said that that does often
change. It's not a one time thing.
Yeah. It's a lot of moving parts when
it comes to this and a lot of pieces are required to continue
to evolve is what it sounds like Now when you talk about market
alternatives, long term and short, short term growth, long
term strategies, you mind sharing some common mistakes
companies may kind of fall into when they try to grow through
pricing? Yeah.
Also one of the more common ones are, you know, folks thinking,
yeah, if I lower my price, can I grow some volume.
So I from a lot of times what we've seen that sometimes will
work, but a lot of times it backfires and ends up hurting
you. So one example of how it could
hurt you is when the market is has a strong demand, you don't
necessarily need to lower price. If you leave your price alone,
people need it, your customer needs it, they will buy anyways.
So if you just lower your price, it doesn't really help your
growth. It doesn't, it just hurts your
margins. There are instances where we saw
another condition is like if you lower your price expecting your
customer, where your customers are promising you more volume
but they don't deliver. So that is another thing where
it might not be your customer's fault, right.
Their business could be, could be not doing so well, therefore
they can't buy as much as they promised.
So the thought here is that a lot of times the demand is
really not up to your customer or you, you know, on your supply
side either a lot if it is derived.
So it's one or two players down the stream that that end up
affecting how your business are going.
So just lowering pricey expecting volume is often not
the case, especially in the B2B environment.
It's good to know basically those who are considering doing
that. And now your workshop, this
workshop you guys are going to be spearheading, you know, it's,
it's comprised of a number of different components that is,
that are vital to pricing success.
And are you guys able to share any examples of any companies
that have successfully improved its, its pricing power using the
strategies covered in your workshop?
Yeah, I've got one. This one of one of my favorite
examples is a company that we had been working with for a
number of years. And what they quickly realized
is they offered their customers in essence of a content
platform. And the content that they offer
their customers was highly differentiated, meaning that it
was in essence essential to the operations of their customers.
But the way that people consume that content was somewhat
painful, meaning that they consume it VA software platform.
And because they're kind of differentiating factors, truly
the content itself. And that's what they hung their
head on. And that's ultimately what the
customers needed. That's where they had been
heavily focused. But the ability for people to
consume that, collaborate on it, download the right files, access
a platform, the user interface, that was a common pain point for
for their customers. So despite the fact that they
were highly differentiated from the content perspective, when
you talk to customers, that was one of the first things come up.
It's like, well, I've got to be able to log into this thing.
And once I log in, the user interface is really, really
difficult to manage. So I have to build all these
internal processes in my organization.
So what they ended up doing is they put in a strategy to one,
capture the differential value that they previously offered,
acknowledging the fact that there's other things that are
pain points for customers. So the message was that, OK,
yes, you know, we have this content that is going to save
you a lot of money. It's going to reduce, it's going
to reduce a significant amount of risk for you.
At the same time, we fully acknowledge the fact that we
need to make investments into our software to make your lives
easier. So the message they went out
with was, hey, we're raising prices a little bit, but we're
taking that and we're putting investments in place and then
they follow through on it. So that they they released this
new platform, customers were able to collaborate easier.
They were able to access information easier.
They saved incremental time. Point being here, they
acknowledge the fact that yes, we have differential value.
We are better than any other option out there.
They incorporated that messaging into their go to market strategy
to say we're saving you time. This is how we're saving you
time, we are saving your risk, this is how we're saving your
risk and this is how we do it better than alternatives.
And by the way, we've now released this new software
platform that's going to address your pain points.
And then the last piece of what they did is they made product
enhancements to in essence, come up with a new product offerings
that were somewhat adjacent to what they historically offered
and, and started building that out.
So it was just a really, really nice way where they, one,
understood the differential value of what they sold, but
then two, created incremental value.
And amidst that, that's where these price changes happen.
And it was a really nice symbiotic relationship between
them and their customers so they could continue down the path of
the market leaders. Sounds like you also, it worked
out pretty well for them because they applied the things they
needed to apply and they followed through with it.
You know, and that's half of the half of the work in itself.
And everything else was kind of following the on the place as a
result of the continued effort behind, you know, their initial
their initial effort. So that's that's awesome.
Now it was more than just hey, we're raising prices.
It's like, hey, we're yes, we are raising prices, but you
know, all these other cool things are happening as well.
Now, there's a lot of things that are going to be taking
place throughout this workshop that you guys are going to be
leaving in this fall conference. What are you most excited for
attendees to take away from your particular workshop?
The content and the the discussions you'll be having?
Yeah. In my experience with these,
it's the piece that I like the best and the piece that we want
attendees to walk away with is like, OK, what are some tools
that we can go and apply to our business tomorrow?
Meaning that, you know, is this something that we can start to
think about to, to analyze our business, look at our business
in a slightly different way and conduct this tomorrow.
But at the same time start to think through what this could
mean from a long term perspective.
Because as we said earlier, when we start to think about pricing
power, there are often these short term wins that come about.
But then setting organizations up for the longer term is, is
where we find the most success. But in order to be able to do
that, what we often find is can we get these quick wins in
place. So our goal is to really achieve
that right balancing act, so we can give attendee something that
they can pick up, implement tomorrow, showcase some of these
quick wins, but and then at the same time start to help their
organizations think through how to capture pricing power over
the long term. Cool, now to learn more about
yourself, Adnan and yourself, Tom or holding advisors you know
at large, working attendees and listeners go to learn more about
you all. Yeah, obviously.
I mean, we've had our website's a great source of information.
We have a plethora of content there.
We can learn a little bit more about some of what we talked
about today and then feel free to connect with both of both of
us on on LinkedIn. Always love to meet with people,
connect with people in advance, and then, you know, fully engage
when we're out in Vegas in a couple months, OK?
Good, good. Super excited to have you both
in Vegas with us again. If you are interested in
learning more about Adnan or Tong or holding advisors at
large, feel free to visit their resources and visit them on
LinkedIn. And also to learn more about our
conference and their workshop in particular, you can visit
pricingsociety.com and you can visit the conference tab for our
Vegas conference, which also as a friendly reminder, is being
held October 22nd through the 25th this fall.
So much again for your time, gentlemen.
And until next time, we will see you all later.
Have a good one. Bye bye.