Hello and thank you all for tuning into another episode of
Professional Pricing Society Podcast.
My name is Terrence and we have another duo we're going to be
speaking with and that is Adnan Akbar and Derek Neal, both
withholding advisors and both expected to be at our fall
pricing conference in Atlanta this October.
They're going to be speaking with us about driving pricing
power through innovation. With nearly 20 years of
experience and consultative and in house roles across energy
management, technology and insurance and leading growth
initiatives within Fortune 500 companies, Adnon specializes in
helping firms commercialize software based offerings.
And with over 10 years of operational and consulting
experience within the enterprise software, private equity and
financial services industry, Derek manages pricing projects
for cross industry clients working with teams to improve
profitability in the market position.
Gentlemen, how are we doing today?
Doing great, happy to be here. Excellent.
Hello, Karen. Hey, guys.
Thanks so much for being here with us.
It's going to be a great conversation.
You guys do have a workshop in Atlanta during this, our fall
conference called Driving pricing Power through
innovation. And so I want to go ahead and
just jump right into the conversation and I want to ask
you as the first question, can you help us unpack the topic for
us? You know, why did you choose
this topic of driving pricing power through innovation?
Yeah, I can maybe give a sense of it and you know Derek feel
free to jump in. So we've been at a number of
conferences and have have the opportunity to do, you know, a
few different workshops and this one in particular I'm super
excited about particularly because when we engage with
clients, we have the opportunity to really get a sense of why is
it that their customers buy from them.
And what we often find is that they are providing, you know,
massive amounts of value to their customers.
And spending a lot of time engaging with customers,
gathering feedback from customers, internalizing that
feedback and thinking through, OK, what can we do next that is
going to make that is going to make sense for a broad set of
customers, but is also an attractive option for us.
Point being, they're trying to walk away and figure out where
to invest to come up with the next best thing, which in many
ways is the essence of innovation, in order for that
innovation to work in order for it to be commercialized.
And in order to scale across their customers that
commercialization strategy of which pricing is such a big part
of is just so, so important. How are you going to take this
to market once this product feature set enhancement is built
up and how are you going to ensure that it has staying
power? How are you going to ensure that
it does in fact meet the needs of your actual customers?
So all of those things are aspects that we are super
excited about taking the audience through at the PPS
Conference in October. And one thing I'll add, add
Adnan. So one of the common themes that
we hear a lot when we talk to pricers is how they they they
they sit at the center of the corporation.
I think there was a keynote at PPS last spring that talked
about pricing as being the center of the universe.
So pricing is truly a cross functional function.
Pricing teams need to kind of stay locked at the hip with the
sales team, business development team, marketing leadership,
product development, technology, etc.
So this is one of the things that I love about pricing and
it's something that comes up all the time when I speak to
pricers. And then this spring, Adnan,
during the the Holden Advisors workshop at at PPS in Dallas, we
really focused on the link between pricing and sales.
So that cross functional pricing sales link the need need for
pricers to coordinate with sellers in their companies to
identify, quantify, communicate value to customers.
And then this year, I think one of the reasons that we picked
this topic and one of the reasons the topic is interesting
to me. Is that it?
It gives us the opportunity to explore a different connection
point that's that's important for pricers and that's the
connection between pricing and product development or
engineering teams. So those in the organization
that are responsible for innovation, developing new
products, adding new features. So that's one thing I like about
this topic is that it gives us the opportunity to kind of focus
the other direction in the value chain on the relationship
between pricing and product development.
And how to have the pricing organization involved in product
innovation early in the process, that's interesting, okay, cool.
So you're kind of taking it into a different direction this year
or this conference compared to the spring conference.
Now, you mentioned innovation and working with the engineering
individuals. Do you mind elaborate on that?
Either one of you welcome, feel free to elaborate.
But what do you mean by innovation and pricing power?
And if you don't mind defining that in correlation to your
specific workshop. Absolutely happy to give a bit
more context on those two terms. We hear them all the time, but
they might not always be so clearly defined.
So we think of innovation in a few ways.
So the the first type of innovation is product
innovation. That's kind of the common way
that folks think about it. Product innovation I think comes
in in kind of two flavors you can innovate up.
It's probably what most folks think about when they think of
innovation. Essentially it's just thinking
of ways to add value and hopefully price to to a product
or service that you provide added by adding features that
the customers is willing to pay for.
And then I think the second flavor of product innovation is
innovating down. So actually thinking about ways
to create a new lower value, maybe flanking product or
service, stripping out some features to provide like an
entry level option, those are benefits.
That's a way to innovate, to kind of help protect the
profitability of your main product and give an option for
more price sensitive customers, which we call price buyers.
But then I think even beyond product innovation, one of the
things we'll talk about during the workshop is like pricing
innovation. And so that's the ability to
innovate around your price model, your price metric, the
value drivers that your pricing is based on.
And I think that's one of the. One of the pillars to gaining or
maintaining pricing power is having a really dynamic
forward-looking innovative pricing model.
And then the third thing that we talk about in terms of
innovation, it can be bucketed into a large bucket of
organizational innovation. So how you change the way that
people, processes and technology come together?
In your in your organization to approve, improve your pricing
power so, so that's a broad topic during during the workshop
we'll we'll focus kind of through the lens of the pricing
function. How can you, as a pricer,
empower the people in the organization to identify,
quantify, and communicate value? Or or or what organizational
mechanisms can you establish to ensure that the pricers remain
aware of and aligned to the other functions in the
organization? So that was a long answer on
innovation. I don't know, I'm not if you
have anything to add. Otherwise, we can kind of talk
about pricing power. Yeah, Yeah.
I mean, I think when I think about innovation, the piece that
I think initially comes to mind is.
So let me go back up for a second and talk about our
approach. And you know, at Holden
Advisors, we often talk about value and the question is how
much we take a regimented approach to determine.
How much value you are delivering to customers.
So for example, right, we have, we'll go through a process with
a number of different types of inputs to say, let's estimate
this out and we've determined that you've provided $50,000 of
annual value to your customers as a result of your product or
or service. And you know that could be as a
result of offering them the ability to increase their
revenue cost savings, decreasing risk, whatever it may be.
There's a quantification exercise when I think about
innovation. One way to think about that
innovation and probably say the most common way which Derek
alluded to is you take that $50,000 and now because of your
innovation you find you you found a better way to do it.
You found incremental innovation.
Now that $50,000. Value on an annual basis it's
$100,000 because you are providing more value, you know
it's a logical and I think fair to be able to charge more for
your product or service as a result of that.
The other scenario is that OK for that $50,000 it's fair for
the the customer to keep a portion of that value and it's
also fair for the company to keep a portion of that value.
The question become and the question then becomes what
portion is fair. What we we refer to that as the
capture rate or the portion of that that the company would take
in as a result of innovation. You can put some thought into
what are some of the levers that I could pull to make that
capture rate fluctuate. Should that number be okay, It's
fair for me to take 10% of that value.
Should it be, well, it's fair for me to take 20% of that
value. It's hard to say.
A lot of different factors come into play, but we will talk
about some innovative ways. To pull both of those levers
meaning like how do you increase that total value, how do you
quantify that, how do you measure that or how do you
change the portion of the value that that you can take.
And I think that does actually touch on, you know there was a
two-part question because I think you asked about what
innovation and pricing power is and it's really tying those two
together which is going to be the core of our workshop.
Nice. Your workshop sounds like it's
going to be jam packed with insights about innovation and
pricing power. So this is really good.
Now how does innovation and really monetizing that
innovation help a company build and maintain pricing power?
You guys kind of alluded to it previously, but if you don't
mind expounding on that as well. Sure.
So, so pricing power is something we've been talking
about at Holden Advisors a lot lately.
I think simply we think of pricing power as as the ability
to increase prices without. Decreasing demand for the
product. So if you think of companies
like Apple or Ferrari or Lululemon, seems like those
companies can charge anything they want for their products
without decreasing, decreasing demand.
So pricing power as a concept is, is is closely tied to price
elasticity of demand for the product.
But we don't need to get into the meth and those examples were
all luxury products, but we we see pricing power in in all
other types of of companies and industries as well.
So as long as the the product or service is highly
differentiated, we we see, we see pricing powers from you know
everything from commodities to to highly niche markets.
We think of pricing power as as a 0 sum game.
So some companies have it and some companies don't and if you
have it, you want to maintain it and if you don't have it, you
want to acquire it. And as Anan was alluding to, we
think innovation is one of those, one of the one of the
keys, if not the key to maintaining.
Maintaining pricing power, but it's really all about ensuring
that the the right sort of innovation is, is happening
within the organization to maintain pricing power.
So in terms of product innovation, it's about providing
the right set of products with the right features and the right
value at the right price to kind of ensure price value alignment
with your with your customers. So if you if you do that well,
it helps you either gain. Or maintain, if you have it
already, price and power in the market.
And when it comes to monetizing that innovation, one of the
things that we see a lot with our clients, I can kind of give
an example, It's the idea of the consumption gap.
So this happens frequently with technology companies, so both
hardware and software. And it's the idea that new
features are added to a product oftentimes faster than customers
of that product are able to consume those features.
Or let alone value those features or be willing to pay
for them so often time. If you take for example a
subscription based SaaS software offering, there's kind of an
interesting psychological effect that will take place if you add
features to a product that a customer isn't interested in or
won't use. Even if you don't increase the
price, even if you don't increase the price, you actually
decrease that value to price ratio for the product.
Because customers see features in the product that they don't
want and they say I don't want that, I don't need that, I don't
wanna pay for that, lower my price and that actually can hurt
the value of the product in the eyes of customers that are not
using those new features. So that's the consumption gap.
We see that a lot. You know this proliferation of
unnecessary product features, unnecessary complexity the
engineering teams can can get overzealous.
You know, they're focused on the technology they're they're
nerding out on the technology, not necessarily always thinking
about things from the perspective of the customer.
And then they they develop and add features that the, the, the,
the customer's not not ready, at least not ready yet.
To. So that whole idea that that's
something that we'll we'll explore in the workshop, that's
a common that we see that an an organization that can degrade an
organization's pricing power. Okay, interesting.
Okay, cool. Now look, many organizations and
companies do already have robust innovation programs in place to
help them grow and also to meet their evolving customer needs.
But you have to ask yourself, you know what can really be
improved now? You know, that's that's one of
the $1,000,000 questions. Since they're on innovation,
what can be improved I. Think it's a great question.
I've been part of, you know, small and large organizations,
and what I've seen is that organizations of all sizes do
put a lot of time, resources and emphasis on creating innovation,
whether that's, you know, having a process where they can.
Farm ideas from their existing teams have competitions or even
like separate out groups that are specifically dedicated to
innovation so that they have that kind of future in mind for
organizations. And I think that often works
really well. The gap that we see I think is
in many ways what Derek just alluded to with the concept of a
consumption gap, because what it boils down to is that.
Is this new product feature or service aligned with the
customer needs at that specific time?
And then taking that one step further, is the organization set
up to be able to monetize that in the right way?
Meaning that Okay for example, we've come out with this new
platform that can run artificial intelligence that can and can
enhance dishes making. So we've got this product.
And it's ready to go and based on our customer conversations,
we've talked to them and we feel like this can add some
significant value to our customers.
But we've got a sales force out there of 1000 different people
with varying levels of skill in in different types of
experience. Are they ready to be able to
sell this? Are they ready to be able to
communicate the value that this can offer their their customers?
Do they know? Kind of.
How to price this thing, how to negotiate and do they really
kind of have they bought into that commercialization model?
That's one aspect of it. The other aspect is you know
with innovation it can be quite complex and if you're looking at
you know in the example that I gave about a platform based
infrastructure that can help run AI, is the customers
infrastructure ready for something like that?
Is this going to impact them in the right way?
That's possible so. Point being that there's all of
these different considerations that come into play and it's
really in my experience it's about having that organizational
tie in between product teams, between sales teams, between
marketing teams, between pricing teams, the entire
commercialization team. So they're they're speaking the
same language that can translate some of these high value
features to something that is going to impact the customer and
can be communicated in simple terms.
Throughout the sales and purchasing process.
So that's I think the the biggest gap is being able to
connect the dots within organizations so they can take
it to market in such a way that it's reflective of the value
they have. And it just to give you a couple
examples of or maybe want a single single example.
What we often see is, you know, an example I gave earlier where
an organization generating $50,000 worth of value the the
reason they are generating so much value is because there's
years of innovation behind it. But what we're finding is that
the prices they're charging are far, far below the value they
are delivering to customers. And I think the take away, one
of the some of the takeaways that we walk away with is that
they've done such a good job with innovation and they've
differentiated from their customers and that they're
delivering so much value, but their prices are not reflective
of that. So we've got some, you know,
general analysis that we'll go through within the workshop to
say okay, what are some quick things that you may want to look
for to get a sense of, are you under monetized?
Is there not it has there been innovation that you've not been
fully taking advantage of? And then the other aspect is how
do you prioritize innovation. So I think a lot of those kind
of tie in elements come into play and we'll go into a lot of
depth in the course of our workshop that you know you
paint, you guys both paint the picture of should you as a
company even ready to innovate and if they are, you know how do
they communicate that and and are they under monetizing, over
monetizing is that at the even a thing when it comes to
innovation. So that's very interesting
aspects regarding innovation from a pricing from professional
pricers like you both. Now let me ask you this question
as well. Are there signs that an
organization is not realizing their full benefit?
Love their innovation. Yeah, Yeah, absolutely.
I mean and that's it's one of the things that we'll go into.
So you know for example, I think one of the things that one of
the quick things that we look for is to analyze the the
customer base. And if you go in and look at a
customer base and say what customers are just they they
absolutely love you guys, this is great.
Nobody ever cancels. That's a good thing because you
want to have customer stickiness.
But that begs the question on are you monetizing things in the
right way for companies that have, you know, thousands and
thousands of customers? It's likely a bit odd that
customers aren't looking for other alternatives or anything
like that. And a sign of having some
customer turnover, not not too much, where it's negatively
impacting your business? That can be a positive because
not every organization is set up to fulfill the needs of all all
customers. They're often operating in
different segments and that's kind of the benefit of
competition because its competitors do different things
well. But if your customers are
sticking with you, then are. If every customer is always
sticking with you, that is assigned to further explore to
say you know what. What would be the impact if we
were to better monetize some of the innovations that we've had
today? Anything to add there, Derek?
No, I just, I just reiterate it's all about understanding the
voice of the customer, the nuances between the different
customer use cases for a different product and I think in
many cases it falls on the. The pricing organization or the
pricing team to be that bridge between sales and product
development to ensure that you're monetizing innovations
correctly or even in some cases directly between the customer
and product development to ensure that innovative solutions
are monetized effectively. Good, Okay, good.
So there are signs and they need to be aware.
That's good. Now you guys have really been
speaking on this throughout the whole.
Discussion about what attendees will learn.
But is there? I mean, I want to ask you guys
individually, is there anything that you are most excited for
attendees to learn during your workshop?
Because they're going to learn a lot of things and this is going
to be a very insightful workshop.
Yeah. For me, I think the number one
thing is like we want to take attendees through the process
from start to finish. And in the background what we
are going to layer in is picking a part at the most granular
level. An example of something that we
have worked through where a company has asked us to help
them best monetize their innovation.
So we're going to take them through that process from start
to finish. What I'm personally most excited
about is to be able to learn from the collective knowledge of
attendees to say to get a sense of how is this occurring in your
respective organizations and being able to get to a point
where we say these are some commonalities that we are
observing as a result of the knowledge.
Because you know, I think our what what I'm most excited about
is the opportunity to facilitate some of these conversations.
But I think the true learning happens from attendees engaging
with each other and to say okay, this is a problem at this type
of organization. Industries could be completely
different, but they're all these commonalities and this is
something that we have used to best approach that.
Whether that's, you know, shifting our customers from
looking at one price metric to another so that we can
capitalize on innovation, thinking about the different
types of price models that can that best resonate with perhaps
different customer segments or building out these processes
from an innovation perspective that like I was saying earlier,
connect the dots within the organization.
So I'm definitely excited to be able to run through some of the
content that we have. But what excites me is a little
bit more is to get the reactions from the room and just try to
build on that. Collective knowledge is
collective knowledge from the attendees.
Yeah. And just ADD we're we're really
focused on making this workshop practical.
So one of the things that I'm most excited about for the
workshop in Atlanta is this tool that we we plan to bring to the
workshop to to kind of kind of make it real and make it
practical for workshop attendees so.
It's a it's a pricing innovation tool, just a prebuilt Excel
tool. We'll be using it in in various
exercises throughout the workshop to help price pricers,
one discover and document the value of innovation innovative
products, and to calculate the the actually calculate the price
for an innovative product of their own.
So whether that's a new product, a brand new product, a
repackaged product or just a incrementally innovative
solution. Workshop attendees will leave
the workshop with a head start and a practical guide on on how
to start thinking about pricing that solution within their
within their organizations. So we're super excited to see
everyone in Atlanta. It should be a should be a great
time it. Is going to be a great time.
Thanks so much guys for your time.
Speaking with me today, Adnan Akbari and Derek Neil,
Withholding Advisors. Before I let you guys go, I want
to ask you guys one more question.
Where can listeners? Visit or go to to learn more
about you guys individually, your company or what to just,
you know, any kind of resource you have out there for
listeners. Yeah, we'd love for attendees to
check out our website holdenadvisors.com and you can
get a more of a sense of our company, our approach, and learn
a little bit more us about learn a little bit more about us.
Okay, awesome. And also LinkedIn as well in
case they want to connect individually.
That's all as a great resource as well.
So thank you guys so much for your time.
They are going to be at the conference October 10th through
the 13th here in Atlanta, GA for our fall conference.
Until next time you guys have a good one.
Bye, bye.