Pricing Experts - Who Are They? by Michael Hurwich

Pricing experts are a rarity in the marketing field.

If firms cannot find exactly what they are looking for, the question becomes one of finding the best potential candidate. There are sub-specialties of pricing that correspond to the four P's and most companies have developed expertise that corresponds to these areas. However, pricing expertise is missing in many organizations, partly because it lacks appeal to those who enjoy relationship building more than number crunching. Finance departments, while focused and expert at analysis can lack customer insight having had little professional contact with customers. Detail orientation often makes it difficult to imagine the impact of various pricing strategies on the business and industry. It is rare to come across someone who can conceptualize pricing models and their implications for the business on a grand scale, get right down to the detail and actually choose prices. Finally, the ideal candidate needs to communicate the justification for the pricing schemes to win the approval of the sales and marketing teams.

There are even greater complications when one considers the expertise required for new product pricing. The more immense the product or service breakthrough, the more ambiguous is the pricing problem. This is because a completely new innovation lacks other comparable products against which to reference price. Pricing represents a huge risk that can make or break a new product introduction. Done incorrectly, it can open the doors for competitors to enter, eliminating the coveted first mover advantage. Your pricing candidate must be able to deal with uncertainty and be comfortable executing on educated guesses, backed by business acumen.

An entrepreneurial spirit is an indicator of this potential, however, hard to find in a large corporation. Monsanto provides an example of excellent pricing for new products when it introduced its Round-up Ready seeds as it was able to gain significant market share by understanding how the value of its product could be translated into appropriate pricing.So, the ideal pricing candidate knows the industry, can see the big picture. Is interested in delving into details, understands customers and their issues, is an excellent communicator, has
knowledge of pricing models and can deal with ambiguity, in cases where new product pricing is required.

How do you find this “Wonder Person”? We suggest some solutions.Preferably, choose from a pool of internal people. This gets you over one hurdle- the person knows the business and industry. Next, is there a sales and marketing person who has an inclination to numbers? Conversely, is there anyone in finance who has a background in sales and marketing? The latter may be preferable since analytical skills are cultivated over time and the impact of various pricing models on the financial statements requires professional training
such as that of an accountant; shareholders will be pleased to know that revenue management is in capable hands. Keep in mind that understanding customers can be largely 2intuitive and some of this intuition can be found in the right personality. Deficiencies may be resolved relatively quickly through a short stint on the sales side. This candidate probably has little pricing expertise in terms of knowledge of models and their consequences. To deal with the situation, there is a range of options and the choice will depend on urgency and budget constraints. On one hand, the internal candidate may be developed over years with the hope that s/he remains with the firm long enough to benefit from this investment. The learning process can receive a jumpstart for more immediate results. Waiting may damage revenue generation prospects.

Faced with new product pricing issues, we advise to jumpstart the learning process. Big pricing mistakes may result in huge losses, even to the point of a failed product launch. A jumpstart can take many forms. Seminars are offered by pricing consulting organizations and these may be customized to your specific requirements. Pricing organizations can help you get up to speed quickly. These are good solutions in the case of strict budgetary constraints. For firms that have larger budgets and would like to complete customized solutions to put them on the right path, pricing consultants can provide a wide range of services and solutions. Look for a  consulting process that is cooperative such that the client team will be well versed in the pricing strategy after completion of an engagement. Look for an approach that will assist in the implementation of the strategy and the training of your people. Large companies that have experience in training teams at their customers provide examples of large companies that have recognized the need to build pricing teams using such external expertise a described above.

A small pricing department composed of employees with the range of expertise described above may be created. The advantage of this approach is that initially, team members can make up for each other’s deficiencies. All of them should be team players, good communicators, quick learners, and interested in expanding their capabilities. Someone who is highly competent at analytical work and financial modeling is needed. Another may be strong at software. Additionally required is a conceptual thinker with well-developed business acumen. As they work together, they will learn from each other and each will become competent pricing analysts. This allows individuals to make later career choices. Either they can stay or move on to related areas in the company. A few may decide to make pricing and longer-term career, but it is not to be expected. What is important is that they train their replacements so that hard won organizational pricing capability is not lost.The latter strategy requires much more coordination, including management expertise to set up and run the new team. There will be issues as to the responsibilities within and outside the team. How will the group fit into the new organization and how can you ensure that they are accepted and not bypassed? We advise a respected senior manager take on the task of creating the new group, acting as a sponsor and change manager who can sell the team to the rest of the organization and gain support for them. Sometimes, inviting third parties to evaluate firm requirements with respect to pricing lends credibility to later actions.