Hello everyone, and welcome to Let's Talk Pricing, the official
podcast of the Professional Pricing Society.
I'm Kevin Mitchell from PPS, and today we are going to discuss a
topic that has become increasingly critical for
pricing professionals, for business leaders, for revenue
managers around the world, and that is how to protect your
pricing power in the face of tariffs and global volatility.
And great news today as we're joined by someone with deep
insight into the space. Very happy that Mister Jeet
Mukherjee, who is the Chief Strategy Officer at Holden
Advisors is with us today. Jeet brings over 25 years of
experience. I think that made you start when
he was 12. He is an expert in strategy,
analytics, pricing, and marketing.
He has worked with business leaders from Fortune 100
companies to founders of innovative startups.
He's helped organizations respond to market shifts with
confidence and clarity. We are thrilled that he is going
to deliver a keynote address at the PPS Profitable Conference in
Dallas from May 6th to May 9th. Jeets keynote on May 9th.
We'll also talk about tariffs and how we handle them.
And also since we are coming up on the Mother's Day, Father's
Day graduate gift giving season, his book Pricing with Confidence
10 Rules for Increasing Profits and Staying Ahead of Inflation
is a great gift for the business oriented moms, dads and grads in
your life. I would certainly recommend
that. It is a great book.
It's a must read for anyone who is serious about pricing
strategy and some of the things that we're talking about today.
So, Gee, always good to see you. Welcome to the podcast today.
Thank. You.
That was that was quite the introduction.
I love this. Yeah.
I need to take you with me everywhere.
That's that's really impressive. I'm impressed.
Absolutely, yeah, as are we all. And of course, you're someone
who has always delivered great insights for people in our part
of the business world. And I'm thinking of the old
saying, may you live in interesting times because that
is certainly what we are in right now.
Obviously, we have macroeconomic concerns.
We have a lot of volatility. We still have some great
fluctuations in raw material goods.
And of course, in our part of the world and many other parts
of the world, we have tariffs or the threat of tariffs or maybe
tariffs and yes, tariffs and lots of other things to discuss
there. So we're going to start at the
top. So G tariffs have added a whole
new layer of complexity to pricing.
So how should companies be rethinking their general
approaches, their strategy in this environment where we have a
lot of, let's say, interesting things going on?
Yeah, yeah. Well, you know, I mean,
obviously you, you know me and I think the best approach is to
keep things simple. It, it really is, you know, in a
time of such dynamic sort of ups and downs and you know, the
dynamics sort of rule changes, I think the best thing is to, to
keep things as simple as possible.
And what I mean by that is I don't think there's anybody out
there that hasn't heard about tariffs and I don't think there
isn't anybody out there that's not expecting a price increase.
So your customer base is already primed and ready to at least
have knowledge of what's happening and understand where
the type of environment that we live in.
So from a consumer perspective, from AB to B perspective, from
all of these folks, everybody's prime.
So this is not like new information.
It's not like you're going out to talk to your customer and the
customer goes what what's going on?
What I've never heard of this before.
So I think we can keep it simple that, you know, whatever you're
feeling, whatever you're seeing, whatever is happening, I think
it's important to understand that you're not alone in this
fight. So what can you do internally to
get ready to execute on what's already might be there or get
ready for what's happening in the future?
Because I think the problem isn't the tariff itself, because
we've been through this with inflation.
So if you've been through this with inflation, you should have
your systems, tools, processes already in place to know and
understand where and how these costs are going to affect you
and what kind of contract relationships do you have with
your customers to be ready for that type of a implementation.
So you're not surprised because remember, you know, Kevin, we
did the, I did the keynote two years ago or three years ago and
the, and I interviewed all these CE OS before that keynote
because we were talking about inflation at that time.
And one of the big things was nobody was surprised about
inflation, but they were surprised.
All these CE OS were surprised by their inability to respond to
the inflation because they didn't know how many contracts
were out there. They didn't know they didn't
have systems and tools to be able to respond.
So hopefully companies have learned from that and they don't
have that as a problem, because if you do have that as a
problem, you probably want to go back three years and try to fix
those things first because that's going to be
fundamentally, you know, one of the big things.
But I, if you have that in place, so you know how the
tariffs are going to hit because that's nothing more than another
cost change and you know how that's going to affect your
transaction base, your products and things like that, then
you're in a good, good space and you know your contract situation
with your customers, then you're in a good space to kind of
determine what you're going to do.
So it's all about giving yourself choices, right?
And, and now you'll have more choices than before.
And for me, when I look at my client base and I look at who is
performing well in this space, those are the folks that are
asking themselves the question of how do I make this situation
an advantage for myself? Because fundamentally the cost
change you're seeing, if you don't know anything, you can't
do anything or whatever it is you, you know, you have to pass
that cost all the way through. That's that's like rule number
one. Yeah, you got to pass it
through. I mean, I don't, I don't know if
there's too much more magic than that from the perspective of
what you should do. But I think where the nuance
comes in is how do you use this to your advantage?
So one of our clients as an example, you know, we were
coaching them on how to, in negotiating big contracts, you
know, against a competitor, knowing that the competitor has
more suppliers in Mexico, Canada or China where you don't have
that level of sort of tie. Then that becomes a negotiation
weapon for you to use to be able to close that deal because you
can talk to your customer about, hey, our prices are not going to
fluctuate like our competitors will because of that reliance.
That's a subtle change, but it's a very powerful change to use at
the right time to be able to, to make it more of a, a positive
for you rather than a negative. That's all there, right.
So that becomes some of the nuances that we deal with on a
regular basis now in this environment, because the other
stuff is easy as far as a prices, you know, cost is going
up. Try to move that through and
you're done. Understood.
And I like your discussion of the competitor who might be more
reliant on China, Canada, Mexico, wherever the tariffs are
coming from versus the company that you were working with.
That reminds me of the old story or analogy about the bear in the
woods. You don't necessarily have to
outrun the bear. You might think about it is what
if I can outrun the guy in the sleeping bag next to me, which
is the case that you were just talking about.
Yes, of course, none of us are going to be able to run away
from tariffs, but we do have to remember if we are in a
situation where it is an advantage or a disadvantage,
then we have to take that into account with our strategies.
And of course, you start off that discussion with something
that we always like to remind people in terms of when things
are very volatile, such as hyperinflation, such as when we
had the Covic disruptions of a few years ago going back to the
so-called Great Recession and even before that.
Keep things simple. Remember your strategies, don't
panic. Remember the value that you
provide to your marketplace, to your customers.
Remember where you are in relation to some others and
definitely keep it simple. Remember things and definitely
do not panic. We have seen disruptions before,
we will see them again. We will get through them.
We will survive and thrive. So I like the examples there.
So definitely appreciate that. And I know from seeing your
discussions and reading your books that you talk a lot about
pricing power. But in some ways you discuss
pricing power differently than a lot of other experts.
And that is you talk about assessing your pricing power by
account rather than by product or customer segment or geography
or business unit. But really you take a great
outside in kind of approach and look at this on an account by
account basis. So what does that shift?
And that's a little bit different than a lot of people
when they talk about pricing power.
What does that shift and focus allow companies that you work
with to do differently? Yeah.
I think in, in times of volatility, it's important to
understand what API you're going after because most, most
companies, most of my clients, they're looking at transactions,
they're looking at profitability, they're looking
at revenue, how to manage their costs, right.
All standard business practice basically.
And in times of volatility like this, we like to add an
important element. And sometimes this element takes
on a higher level, higher meaning than your profitability
metric that you might be using on a transaction basis, which is
customer lifetime value. Customer lifetime value.
You know, the name of the game in volatility is really to be
able to look at the profitability of your customer
over a longer period of time rather than this short period
right now or that one transaction.
Because the more volatility there is in the market and the
more you can develop relationships with your customer
and share in the risk and you hunker down together in the
trenches to kind of out ride this wave that becomes extremely
important. Then all of a sudden you have
that relationship and you've got a longer runway with this
customer than ever before. So the importance of pricing
power and to apply pricing power to accounts is the sharing of
the risk, it's the understanding of customer lifetime value.
And it's to make sure that this you look at this as a short term
period of volatility and change rather than, hey, this is, you
know, that my price change is there and you know, take it or
leave it and I'm going to walk away from here.
I think the more you have these extreme notions of, you know,
that type of behavior, the more disservice you're doing to
yourself in the long run. The other piece is there's also
the other side of the coin. You can have that type of a
relationship when you know that some customers are taking
advantage of, you know, there isn't that that old principles,
that old principle that holds true, which is 20% of your
customers make up 80% of your profit, which means you have a
long tail of unprofitable customers.
So times like this is a great time to push a little bit more
on that long tail. And if some people drop out,
it's perfectly OK because they're not that profitable for
you and they haven't been profitable in the long term.
So it's a it's a way for you to right the ship a little bit
also. So you have to kind of
strategically understand where are you in that spectrum of what
you should do based on account by account these types of
metrics that you need to look at.
Very interesting. And of course I definitely like
the approach of thinking about this from a customer lifetime
value perspective, being a partner looking for the win wins
there. And I like your Pareto example
where 20% of your, your accounts are your customers account for
80% of your overall profitability.
And of course we've all seen the so-called whale curve where that
let's say the worst 5% of your customer base, it probably has a
negative number on that, on that profitability where it kind of
goes the other way around. That's right.
And of course, these are the X's in all of our lives that we are
thrilled when someone else has to deal with with those problems
instead of I. Haven't used that analogy, but
that's a pretty good analogy. I might have to use that on
Steam. I think we have to be careful
with that one and not mention specific names.
So, yeah, we won't mention specific names there.
But of course there are cases. And you're right, when we look
at this by account, there are some things where we can find
those win, win partnerships where we can build those
relationships where when we share in the risk, that becomes
a value proposition in itself. I mean that becomes kind of a
product feature or benefit and that goes all the way up the
ladder to the companies that we are dealing with, particularly
in times when we have the volatility.
So I definitely like that explanation there.
So I want to ask a little bit more about pricing power
specifically. And you know that in the PPS
surveys, we always ask people, the PPS index, we ask people on
a scale of one to 10, how much pricing power do you think that
you have? In our last survey, it was down
slightly, but it was down a good bit with our respondents, with
our members saying we used to be around A7 as far as on a scale
of one to 10, but now we're looking more like a six or a 6
1/2. So what are some key indicators
that a company has or does not have pricing power when looking
at a particular account? Yeah.
So the way we measure pricing power, you know, we, we have
sort of an out high level view and then it gets down to more
details. But at a very high level, we
have two axis that we measure pricing power off. 1 is your
price differentiation. So your product or service, how
differentiated are you in the market?
So imagine sort of, you know, a company that has highly, highly
differentiated solution, they'll be on the far, excuse me,
they'll be on the far right on that axis, the Y axis that go up
and down that axis is your go to market capability.
How well can you take your product or, and, or service to
market? How well trained are your sales
folks? How well trained is your
marketing, your product development?
Do they use value to prioritize features of your product sets?
You know, how do you really go to market and how efficient are
you then that far right on the bottom side of differentiated
product can go in the upper right corner and that is where
you want to be at from a pricing power perspective.
It takes both axes for you to have pricing power.
So that's a very important notion to really understand
because in our history and, and Kevin, you, you and I have been
around long enough to know these examples, not to take off
current companies, but old companies like Zenith, they were
so advanced from a television perspective, right?
They were in the bottom axis, they're on the far right.
They were like awesome, great IP, great TV's, but they were
really crappy and going to market and they didn't last very
long, right? And these Japanese manufacturers
came in and they were not so great from product
differentiation, but they knew how to execute in the market and
they started eating away at the differentiation.
You can make the case for AT&T, they had incredible R&D.
They had incredible knowledge of, of voice over IP and other
things, but they weren't able to take it to market as fast as
some of the other companies were.
So it it very, very important, you know it.
Yes, they're smart people out there.
They're great products out there.
There's grow all this differentiation that's out
there, that's awesome, but that's not enough.
You have to know how to go to the market.
You have to know how to train your customers.
You have to know how to communicate to your customers.
You need to know how to protect your price.
You need to be able to give options to the different
customer types that are out there.
You have to understand your segment that you're operating
in. All of those things become
extremely important for you to actually have pricing power.
It's not just a feeling, it's your actual capabilities on both
of those axes that determine your pricing power.
So for us, when we look at it, but from an account by account
perspective, we look at all of those elements.
We look at what are they buying from you?
How are they buying it? What's their usage like, what's
their sort of long term potential with you and what do
they value from you? What are they truly value?
You know, and, and the old Nagel Holden way of understanding
value, which is how do you help your customer increase revenue,
decrease cost or mitigate risk, right?
We measure that. So it's important to understand
that by account, but it's also important to take that
understanding of differentiation and apply it to your go to
market and what we call a value based organization.
Are you a value based organization?
Do you have your sales folks ask and talk about value on a
regular basis, not just right before a big negotiation of a
contract, but throughout the year?
Do they talk about it? Do they get that information and
do they pass it along to customer service, to product
development, all of those things?
Are you truly a value based this organization?
Because if you're not, then you're not going to go as far on
that Y axis and you're going to be stuck in the bottom and
you're not going to be able to get the returns that you know
you're able to get. I see.
And I know internally for me the plural of anecdote is not data,
but I always get the sense that a lot of I remember companies
that I know pretty well seem to have a lot more focus on the
price differentiation part of that than the the go to market
part of that. And you gave a couple of great
examples there of where people were not able to scale, not able
to get their products and goods and services where they needed,
not able to get the support, the training, the communication that
their customers needed. And I know at one of our events
last year, I did a horrible example in my opening address.
It's probably on the PPS website, but don't look it up.
It was horrible. And I took talked about social
media and about how before Facebook, before Myspace, there
was Friendster. It was great.
They invented this thing where you connect people, but they
were not able to go to market. They were not able to scale up.
They grew so quickly that their load times became so long that
even though they had a better initial IP than Myspace and
better than the original versions of Facebook and things
like that, the wait times were so big that they could not
present a good product to their customers and they evaporated.
And now they exist basically as a gaming forum in the
Philippines, if I remember right.
But there are a lot of great examples about that, how the go
to market capabilities, the aligning sales price,
communication, marketing, product teams, all of the above,
particularly when things are moving very quickly, how that's
very important. So with that in mind, what are
some of the most effective ways to build the alignment between
pricing and sales and business leaders and product managers and
the supply chain when things are going crazy to keep everyone
moving in the same direction? Yeah, I think it's a great
question. I'm going to pause right here,
Kevin, because my teams seem to have crashed, so I have no
visibility of you. So I.
Apologize. Let me see and.
Also, Alex, I'm here in the office and our Internet is
spotty and I just had to reconnect it, so I might be
disappearing as well. OK, Well, yeah, it's going to be
Monday, all day on today, on Wednesday.
You. You.
Are you are back by the way, so I'm so.
Far. Everybody's good on my end.
I've been able to hear and see you just fine.
OK, OK. Great.
So Kevin, I think I think that's a great question.
And one of the things that you know, you and I have had these
discussions also is pricing is so wonderful because it's cross
functional. You know it was horizontal and I
love that about pricing because we go cross functional and we
touch so many other departments, divisions, people, capabilities,
it's just wonderful. It's, it's, that's one of the
reasons I love pricing so much is I'm not bucketed into one
thing and only one thing. My 25 personalities can't handle
that. I mean, I need all the cross
functional stuff we could get, but it's, it's important to
understand that pricing is part of sales.
It's an extension of, you know, you're, you're a salesperson
essentially, if you're a pricer, you're a salesperson.
So if we have the mentality that a salesperson is not out to
undermine my price, but rather are we as pricers doing
everything we can to provide the tool sets that sales needs to be
successful? You know, do they have the
tiered offering? So when they come up against a
price buyer, they know how to take value off the table and
give them the least amount of value so they can get down to
the smallest price for that price buyer.
Do they have that or are you allowing them to just kind of
free Milly, you know, choose whatever they want?
Because if, if somebody just gave me all the reins, I'm
probably not going to make the best, best decisions.
If I get some guidance and get the right tools, then I am all
of a sudden better equipped to make the right decision.
So I think there's a big question that's out there that
we need to ask ourselves, which is for the different types of
customer engagements that are out there, are sales properly
equipped to handle those types of engagements?
And I will tell you, the more clients that I see now, I feel
like pricing, you know, PPS is a great example of it.
You've really understood that X axis, that differentiation, that
value, price alignment. The software companies have done
a great job of, you know, Zillion and Vendavo and, and
price FX and all these guys are really understanding, Hey,
here's your price model. Here's you know, how you stick
to your price and, and that's great.
So I think that X axis is, is good, relatively speaking, but
the Y axis, there's tremendous amount of gaps.
There's so many gaps. You know, you go to product
development, you know, I go and say, oh, how do you know which
features you need to release? And they, and they're like,
well, you know, it depends on who's complaining about what.
You know, it's, it's this old mindset of, you know, the, the
squeaky wheel gets the priority, which is really a terrible way
to do it because it has no alignment of value and you don't
know if you're going to make up the returns for what feature
you're building. And, and so there's a, there's a
lot of gap that's there. So I would start with some of
those foundational things that says, you know that customer,
what are the different types of customer engagements do we have
and is the go to market team well prepared to handle those
engagements? Do they have the right tool set?
Then after the tool set, I would have a conversation about
capabilities. So if they if we gave them a
tiered offering, the second question would be do they know
how to use a tiered offering for those customer engagements?
You know, do they have the right capabilities?
What can I do to teach them, help them of why that tiered
offering exists the way it does? Definitely.
And the cross functionality element of pricing and revenue
management, I agree. That's one of the things that
definitely makes it interesting. And we also had this discussion
where we have to be artists and scientists and change managers
and all of the above, but we also have to talk with all of
these different groups in a language that they can
understand. So for example, the way that we
deal with a veteran 25 year salesperson might be completely
different than how we deal with a brand new top ten MBA who's a
financial wizard or an analytical person or something
like that. You can't approach those two
individuals in the same way, but you have to be able to approach
those two individuals in a way that they can understand as
well. And also I like how you start
with the tool sets to make sure that's covered and then you go
to the capabilities. And of course, this is part of
your book and a lot of the things that are one of your main
areas of expertise when we talk about negotiating and about how
we deal with our customers. And we can have internal
customers, external customers, sideways customers and all of
the above. And also the very, very good
point that we are all sales people as far as ideas and
getting things across. And some of our sales people are
pricing people as well when the negotiations happen sometimes
with the customers. So there is that great Venn
diagram overlap. And of course, as pricing
leaders, we have to be connected with everything, operations as
well, marketing, product management, finance, sales,
senior management, all of the above.
But yes, we do not have the same job in every situation on every
same day. It can vary quite a lot.
And it's our job to be able to talk in all of those different
languages. So thank you for the explanation
there. That's great.
And we are coming up on time a little bit here.
But I do want to ask one more question and that is for pricing
professionals who are listening today, what's one step that they
can take immediately in their offices in their discussions to
start strengthening their pricing power in the face of all
the volatility that we're facing right now, you know?
I think I think knowledge is power, right?
And I think one of the one of the gaps that we do do see out
there and I think one of the biggest steps is obviously
internally you have to know and understand the impact of changes
from your suppliers. You have to know that and how
that affects your transactional price.
But do you know and understand your competitive capabilities?
Do you understand your competitors reliance and their
cost structure and who they buy from?
And that's where we're seeing a lot of gap in that
understanding. There's a lot of hypotheses, but
that understanding is not quite there because that understanding
really helps. That's the building block.
You need to be able to know what strategically what you can
absorb and what you can't absorb and what you can move the cost
through. So that understanding of that
competitor and that competitive capability is a gap that I'm
seeing that's out there that's preventing you from having all
the options and choices strategically to make decisions
about your customers. And I think that's that's the
one thing that I would, I would encourage everybody to focus
their attention on. Yes, of course, if we only have
our internal data points, you can't really determine trends or
where you are in a product matrix or what your customer
thinks about A versus B versus U versus someone else in that
regard. So that makes perfect sense.
Thank you for the explanation there.
So something that we can all work on, we can all kind of get
more external there. Think about our customers, of
course, as pricers and as as revenue managers.
Game theory should be top of mind at all times.
So it's not just us making the best choice, it's us making the
best choice in conjunction with the next move and competitive
reactions and market reactions and macroeconomic reactions and
everything that goes on there. So we have to be a piece of that
puzzle and not be so internal and just thinking about
ourselves and and what we offer there.
A great explanation. I like that so much.
Like you said about the bear, you just, you just have to be
faster. You don't have to be the
fastest. Exactly.
That's right. Yeah.
We are not going to be able to outrun all of the things that
are going on from a volatility standpoint.
But we can improve our standing from an overall positioning by
figuring out strengths, weaknesses, opportunities and so
on and so forth there and working on those where we can.
So a great explanation there. So once again, I want to thank
everyone too for joining us for our podcast today.
Make sure if you have not already done so, but definitely
do absolutely would give the highest recommendation to G's
book, Pricing with Confidence, 10 Rules for increasing profits
and staying ahead of inflation. For the several hundred of us
who are going to be at PPS Profitable in Dallas in May,
make sure to check out Jeet's keynote with us on Friday
morning. That would be May 9th, I
believe. So I'm very much looking forward
to that as well and other discussions there.
So, Jeet, thank you so much for joining us.
Thanks for the practical actionable advice and thanks
everyone for tuning in to Let's Talk pricing Jeep, Thank you so
much. Any follow up words from you?
No, I'm good. Thank you very much.
I really appreciate it. All right, we will.
Look forward to seeing you soon. And again, thanks to our members
for joining us. Make sure to stay tuned for
upcoming versions of the Let's Talk Pricing podcast.
And I look forward to seeing everyone soon.
Thank you so much, Jeep. Thank you.
Take care.