Speaker: Scott Miller, President, Miller Advisors Inc
Please introduce yourself and tell us why you're helping the Product Marketing Community.
Scott Miller: My name's Scott Miller and I'm founder Miller Advisers were a boutique consulting company that helps B2B organizations develop, redesign and optimizer pricing and offer structures. I first met Rowan and the team at one of the product marketing community conference events, and it became quickly apparent that one of the hot topics was around pricing, but was also apparent was the lack of content and industry expertise on the topic itself. So our goal here a PMC to address some of the biggest pricing and offer design challenges faced by companies such as yours in today's competitive and highly innovative digital environment.
How would you rate your organization’s pricing practices?
Scott Miller: so I'd like to ask the question, How would you rate your organization's pricing practices? In essence, companies with the low pricing maturity score typically operate using ad hoc pricing processes, and that results in weaker financial learnings with a high degree of margin leakage. Alternatively, high pricing maturity organizations. They invest in improving pricing skill sets across organizations and adopt best practices and pricing and monetizing based on value. So especially in a digital transformation era, innovation and value differentiation or key, and those higher pricing maturity organizations are better equipped to monetize their value and ultimately their industry in both earnings and growth. But don't fret, even if your organization has a lower price maturity rating, Keep in mind that pricing improvement it's a journey, and there's always opportunities that your company could take advantage of in the short term, as well as the long term to ultimately become better pricers
What major gaps and opportunities do you see your organization's pricing strategy?
Scott Miller: what major gaps and opportunities do you see within your organization's pricing strategy? Typically, there's four key areas that often need improvement with respect to pricing and B2B organization. The first is around offer design itself, and this involves adopting a process that starts with defining the product segmentation strategy. Creating your link between price and value. Developing your offer structures, metrics and tears on finally doing your financial and price stress testing analysis, or so, offer designs ultimately a value based process for how your team's go about setting your pricing. The second area where there's often gaps is around enablement across your organization. As well is with your channel partners. This is where there could be opportunities to improve how your sales team sell the value story and link this this to the pricing conversation. So arm your teams with how to sell relationship. Sellers are quick to discount to look like heroes with their clients, where as value sellers they know how and when to earn a premium at the third area is really around the execution and the contractualization of your pricing, and often this is an easy area for B2B companies to incur a lot of margin leakage or suboptimal price. Their deals that might include a really complex mixture of hardware, software and services is part of their full solution. so your company needs to be laser focused around deal execution on understanding when to prices. A premium on when to discount at the fourth area, where there's often gaps is what I call the PICO or the pricing ecosystem and this includes all the other processes and and department people and systems that are really impacted by changes to your pricing strategies. So just think about how revenue recognition and your contracts themselves were impacted when migrating subscription pricing bottles from legacy one time fees. So what I'm trying to highlight here is that pricing is really an end to end process within your organization, and significant gap in any one of these four areas can really lead to some sizable gaps and maximizing your earnings. A swell is being able to execute on your intended pricing strategy
How does 5% improvement to top-line using smarter pricing (with no change to volumes) impact your GM% and bottom line?
Scott Miller: there is an interesting study done by McKinsey on it showed that a 1% increase in price translates into an 11% increase in profits, doing some comparisons. Just increasing volume by that same amount resulted in just a 3% increase. Cutting variable costs by 1% only resulted in 8% increase in cutting. Fixed costs resulted in only 2% You can really see the power of pricing and its relationship to financial performance for these average companies. it's interesting that a lot of many organizations they conduct an annual strategy sessions where teams often review opportunities to drive financial improvements and growth. And, more often than not, the pricing conversations excluded as part of those annual strategic reviews. so one company. They change their approach and they they ask their product teams. What improvements can we make? Pricing to drive an additional plus 5% to the top line? And I know that that the knee jerk reaction in this case is is let's just take all our prices and increasing about 5%. But I like to use the term pricing smarter, not necessarily pricing higher, especially for B2B organizations because this can really include, you know, managing the net pocket price and reducing merging leakage in your contracts. Or maybe you put an effort around improving how you go about discounting or improving. You're discounting practices and guidelines or even, just, you know, creating a more favorable, good, better best price structure that improves your your average jsp eso. Which brings us back to the question. How does 5% improvement the top line using smarter pricing impact your company's bottom line?