All right, hello and thank you all so much for joining us for
another episode of the Professional Pricing Society
podcast. My name is Terence and in
today's episode we have a very, very special guest with us, a
long time friend of PPS. Her name is Joanne Smith.
She is the President of Price to Profits Consulting.
She is also an author of The Pricing and Profit Playbook, The
Price Negotiation Playbook and Pricing in a Crisis.
She is the former DuPont head of marketing, pricing and customer
loyalty and with more than 20 years of global business
marketing and pricing expertise. She now works with global
companies and chemical and and industrial industries to help
them develop world class pricing and profit strategies, pricing
transformations and pricing improvements along with pricing
skills. Miss Joanne Smith, how are you
doing today? Oh, I'm doing just great,
Terence. Thanks for.
Good, good. We're also super excited to have
you because I believe you'll be with us at our upcoming fall
conference in Las Vegas. Is that correct?
That's correct. I got a new workshop that I'm
introducing there. OK, good, good.
And this podcast is essentially going to be serving as a teaser
to the workshop, is that correct?
Yes, yes it is. OK.
All right. Today's title of this episode is
Segmentation, Mastering the Hidden Challenges.
And let's just go ahead and jump right into our conversation
today. You know, when it comes to
segmentation and when it comes to pricing and and just this
overall concept for business, why, why is doing segmentation
so important for any business in your personal opinion?
Yeah. Actually, Terrence, it's like
the Holy Grail for pricers and marketers because it's through
segmentation that we can drive higher price and profits with
some segments and we can drive greater growth with all segments
that we target. And here's the deal.
Across the world, across marketplaces, there are
customers that derive greater value from certain parts of our
offer or our service or our customer experience.
And there are certain groups that are willing to pay for some
value and others that are not willing to pay.
And if we're going to be able to one, attract the most growth,
then we have to have the right value offer and price point that
aligns with those different groups.
And often there are those groups that really value a lot of what
we bring. And perhaps today mostly we're
under pricing them right and we can get higher price when we
really understand their value and willingness to pay.
That's good. OK, good, good.
Now, you know, we kind of whenever why segmentation is so
important for a business, but are there different types that
you, you know, primarily focus on when it comes to
segmentation? Yeah, there's a lot of ways to
segment and most businesses should be doing multiple types
of segmentation. In the workshop at PPS, I'm
going to concentrate on some of the from simpler to a little
more complex yet more traditional segmentation all the
way through customer needs based segmentation, which I might
contend is the maybe the most powerful yet the most difficult.
So if I think about what do I mean by simpler, they can be as
simple as how we segment based on customer size, a big customer
from a mid size or a small customer or how do we segment
our product portfolio from our big fast movers high volume to
those custom ones or the tail slow moving low volume products.
Or we can get a little bit and should be getting a little bit
more into what about regional differences?
Do we price different in Asia than Europe?
Do we price different in the United States on the East Coast
versus the West Coast? What about market or or
application, right. Some products that go into maybe
aerospace probably have a far different value and price point
potential than if we sent that same product over into an
automobile end use. And then we'd go right into
channels. What about are you going direct
distributors, online channels? So those are the typical types
that I will deal with. And here's the thing, even the
most simple ones have some hidden pitfalls that companies
fall in and don't even realize they're not doing their optimal
segmentation. That's interesting, super
interesting. And you know, there's a bunch of
different types of segmentations just as you've just laid out for
us and obviously the ones you primarily specialize in and work
in. But you know, you you've said
before that customer needs based segmentation is the most
powerful type of segmentation. And I assume this kind of goes
back into what you were just saying about, you know, is it is
it worth entertaining the idea of pricing in different regions
or pricing in different parts of the world?
You know, if you don't mind, please elaborate on, you know,
why. Why is customer needs based
segmentation so important and debatably the most powerful type
of segmentation? Terrence, it's not just the most
powerful, it is the most difficult.
So let me get back up and just speak to what it is, why it's
most difficult and then I'll jump into how powerful it is.
So needs based segmentation. It it exists whether we want to,
you know, recognize it or not in every single part of the world.
I can take a region, I can take a market segment in that region,
I can take a product in that region.
And within that line there will be different needs based
segmentation. So typically there's a group
that one might call price buyers.
They are predominantly only paying or buying on lowest
price. There's other value groups that
might be buying you predominantly for all your
service and customer experience and hand holding.
And yet there may be another value segment that won't pay for
any of that hand holding. But boy, do they want your most
unique or custom products. So those things exist.
We need to deal with them, but they are not measurable like the
other types of segmentation, right?
I can easily measure whether a customer is big or small,
whether they are in Asia or North America, whether they're
in aerospace or automotive. But customer needs based is
subjective. We have to have a number of
different variables and things that we look at to try and place
them into a cluster of like customers that we can treat
differently. So that makes it more difficult.
But why is it so powerful is because we have far different
pricing power with these individual groups.
They absolutely have buying groups that use different
tactics against our salespeople and we need to be able to
counter their tactics, see through those tactics to really
understand what they value. Do they value us so that we make
smart pricing decisions? In fact, when you look at a
pricing decision, I don't care what deal a salesperson comes up
with it they're struggling on whether to discount or not.
I'd go right to try and understand the customer needs
based segmentation they would fall in, in order to be able to
help them understand whether they had the pricing power,
whether they should discount, if they discount, what gives and
takes should they be getting. So very, very powerful and
fundamental to everything a pricer really ought to be
thinking about at a sales level in the deals to the more
advanced where we can actually help set them, maybe with good,
better, best offers or something along that line.
OK, OK, wow. You know, and it's funny because
this this is a topic I feel like you especially of all people can
really go in depth with. And you know, when you talk
about different types of segmentation and just generally
just pricing and, you know, 20 years of expertise, you know, in
this industry and in this field, you know, you have a lot of
gems, a lot of insight and wisdom to give to others.
And it, which brings me to my next question.
You know, this workshop, in your opinion, is it targeted for the
more experienced pricer, somebody who's kind of been been
down the road for a while now and knows what they're doing?
Or is it more geared towards those who may be fresh into
their career of pricing and and beginner with beginning with
pricing resources? What would you say about this,
particularly regarding your your workshop?
That's a great question. It's actually great for all
levels because beginners are going to learn how to do things
well and there's a number of segments, segmentation things
that they can very quickly get to implementing.
On the other hand, experienced folks are probably doing a lot
of the more traditional, maybe they can get deeper into the
more advanced, but often there are hidden pitfalls that really
play out and even the more advanced may not realize that
they are doing things that maybe are less effective than they
think in in fact, I might just, you know, I go back to Terence,
you made some really nice comments about my experience and
whatnot. But I think my experience having
run this for 50 some businesses in DuPont for years is I bring
the practical approach versus the theoretical approach.
And it's in that practical approach is where we can uncover
and solve for some of these pitfalls that I mentioned that
even more experienced buyers often fall into.
Yeah, pitfalls. I mean, I'm sure there's a
plethora, especially if we're not aware what, what would you
say is one of the biggest pitfalls or challenges that
maybe suppliers run into? OK.
So, right, you're absolutely right that there are a number of
pitfalls, but maybe say the most obvious and the bigger 1 might
be often when we set prices, we are looking at our historical
prices the last year or the last several years.
And we're using that to really knuckle down into that fine
different segments and base that path pricing to help inform
future pricing. Now here comes the rub.
Many times, if not most times, that historical pricing that we
have is not good pricing. And it might not be good because
perhaps salespeople didn't have the skill or the confidence to
really price properly or equally.
They may have gotten no guidance at all from a pricing or
marketing group or they may have gotten poor guidance.
So now we've got all of this data that's subjective.
Is it good or is it bad and we're going to infer.
So we have to bring in not just take the data and move with it,
but to challenge every piece of that data and make adjustments
for when historically things were not done in the best way.
So that we actually come out with much smarter pricing
targets and floors by these varying segments.
And I'll just give you like a simple example here.
It's it's not unusual. I go into a business and I'll be
doing the analysis and I'll look at say customer size versus
pricing. And of course there'll be a
scatter all over the place by size and you expect the big
customers to have better pricing than the small.
But when I really look at the median of different customer
size and the spread, it's not unusual that I see almost the
same spread across small customers as big customers.
And if somebody just took the medians and those price bands
and went ahead and set targets and floors, they might conclude
the small guys should be 5% higher than the big guys 'cause
they're looking at maybe poor data where they should be
saying, wow, that doesn't look right.
Why on earth are we given such good prices to so many of those
small customers? That whole segment needs to be
shifted up and then we're going to put in a higher bracket or
principal or rule for that group.
Somewhat, not fully, but somewhat switching gears here
because you mentioned the small business versus the larger
business and the smaller data. Does big data or AI help to
speed up or accelerate the ability to segment regardless of
the size of a company? Yeah, the easier you have
availability of data and if you're lucky enough to have like
a professional pricing system, you can get at analyzing your
data at so much faster and it's such a deeper granular level.
And then you also have the ability to manage it, you know,
at a more granular level. Now having said that, you can do
every bit of this segmentation if you only have Excel
spreadsheets and you maybe are lucky enough to spend 23000 on a
license for like a Tableau or Power BI to give you graphical
analysis. So you can do it.
But when you have these better systems and data, you're faster,
you're more granular. But here's the deal.
Because of that, you're quicker to like, let's say get on a
train, but is that train going in the right direction or you
just quickly sending the sales team off in the wrong direction?
So for AI people, you actually have more pitfalls that you have
to worry about because you are more likely to get into a more
granular level of segmentation. Yeah, yeah.
I could give you a a, you know, a good example of a pitfall
there if you if you'd like. Sure, sure, please.
Yes. Yeah.
So in general, it's the are we getting so theoretical versus
practical in the segmentation that we do.
And boy, we don't want to fall on the theoretical side.
We have to get to a practical side because at the end of the
day, whatever pricing we set, sales has to understand it, has
to internalize it, believe it is fair for them to implement it.
Not only to implement it, but to actually be able to talk to a
customer. So the customer at the end of
the day feels that what they're being priced is fair, it's
trustworthy, it has integrity. So if we get too confusing, if I
don't care how theoretical, if they can't simply understand it
and then remember it on the spot with the customer and not have
to look up a spreadsheet that has 30,000 choices and we're
gonna, we're gonna lose it. The sales people will be
frustrated, right? They may completely ignore it
because they just don't understand it.
It's too much. And then they're gonna do their
own thing. And we haven't guided them or
they're gonna, they're going to do exactly what the number says
without being able to explain it to the customer why that price
point is. And that is trust with the
customer. So that's probably the biggest
pitfall of advanced segmentation, especially when
you have the advantages of AI and big data.
That's good. Wow.
Yeah. So you make a great point.
I mean, big data using artificial intelligence, it can
definitely, you know, expedite certain processes and become a
more efficient way of, you know, a processing and segmenting.
But like you said before, there's pros and cons to
everything. And, you know, in this regard,
there's a lot of hurdles that are worth considering that, you
know, you have to jump over if you're going to be moving in
this direction. And, and I'm super glad that you
were able to kind of shed a, a good light on this.
Now this, this podcast again, is serving as a teaser to your
workshop that's going to be coming up in our fall
conference. Is there anything that you would
want attendees to take away your, your workshop from your
content, from your conversations that you're going to have?
Because I mean, for for listeners tuning in right now,
I'm not sure if they're aware, but Joanne Smith is always one
of the favorites at our conferences when it comes to
these different speaking sessions.
And so she has a lot of gems to just kind of give back to those
who are who are listening. And so is there anything in
particularly particular you want the attendees to kind of walk
away with? Yeah, that's a great question,
Terence. So as you know, I try and make
things as practical, practical and simple as possible to give
us, you know, 80% of the bang for the buck.
So I'm really taking what can be a very complex topic, boiling it
down to very simple way so everybody can walk out of there
and begin to make changes and how they're setting price and
doing that right away. And, and again, even those
advanced people for them to see. Oh my gosh, right.
I did some good stuff. But maybe if I could just
tighten this up or that up, it's going to be far more effective.
OK, good, good. And one last question to leave
with those who are listening. Where can they go to learn more
about you as a professional and as a person?
Maybe some of the resources you have available to those who are
interested and maybe to learn more about, you know what it is
that you that you stand for. Oh, OK.
So right, they can certainly read any of my my books.
So you you mentioned a couple of those right in on the get go or
they can go to my website if they want to
www.pricethenumber2profits.com and books are listed there as
well as the varying more of my background, more of my offerings
etcetera. OK, awesome.
And thank you so much again for your time with us today to kind
of shed some light on what it is you're going to be discussing in
the fall at our conference. And also to shed a light on just
generally segmentation and mastering some of the different
hurdles to jump over some of the challenges to kind of be aware
of. And until next time for all the
listeners tuning in, we will see you guys later.
Have a good one. Bye bye.