Why Mid-Market Companies can reap even greater returns by investing in pricing solutions?

“Mid-Market” Blog

By: Vernon E. Lennon, III

In today’s conversation we look at why Mid-Market companies can benefit even more greatly from investments in pricing solutions / services / software.

For over 20 years now the Pricing industry has primarily focused their efforts on the “Billion plus” target customer while offering little attention to the larger group of smaller cousins.  While the industry has been in growth mode during this time frame due to some customer internal knowledge of the pricing lever, this doesn’t equate to Mid-Market customers not needing the attention.  Rather I contend due to the demand and the ROI considerations; the pricing industry has primarily focused their marketing campaigns on the “big boys”.  I further suggest that a two pronged approach in the future can not only help the Pricing Industry grow, but can also educate and assist a largely untapped segment.

After all in the U.S. alone there are thousands more of the “sub 1 Billion” customers all looking for enhanced valuations (more fodder here in a future post) and yearning for learning on how to do so.  Couple this with the greater potential for “quick win” returns leading the charge on change management and cemented executive commitment and this pool of companies appears to be ripe for collaborative improvement. 

So let’s take a look at my top ten reasons why this segment is poised to benefit more from pricing assistance.

Mid-Market Companies:

1. Typically don’t have dedicated pricing departments.  In fact many of these companies’ functional departments are responsible for multiple areas and thus only focus a small portion of their time dedicate to price management.
2. Historically have grown out of an idea / innovation, not through business efficiencies.  Ideas and innovation have led them to a great position in the marketplace, but as the maturation cycle has evolved this competitive position is eroding.
3. Tend to be Sales Led vs. Sales Centric.  Historical desires for growth have given the sales organization too much leeway on order taking.  Rather than providing them with central led enhanced information, central offices often relinquish majority control on ultimate pricing decisions.
4. Volume oriented.  Strategies for growth and overall compensation metrics (Sales and Executive) often are too heavily weighted on top line growth, hence there is no impetus to “walk away from bad business” and focus majority efforts on profitable customers only.
5. Believe the forward supply chain typically has greater leverage.  In many cases, Mid-Market companies are selling into customers and channels that are much larger than they are, like the “big box” stores.  This offers the appearance of limited leverage, and without proper controls in place margin leakage here can be great.
6. Assume they need large capital budgets for software solutions.  Due to a lack of clear education and communication, many companies in the segment don’t realize there are some “value” priced SaaS Software packages and Solutions that can firmly meet and beat their pricing needs.
7. Deal with data inefficiencies and information inconsistencies.  Much like their larger cousins lack of data control is perceived to be a road block, but this isn’t necessarily the case (see October 2011 PPS Presentation on Virtual Markets).  In fact there are many existing techniques that can assist companies with taxonomy and hierarchy improvements along with firm graphics enhancements.
8. Often fail to project a true image of value to the marketplace.  Lack of investment in clear “voice of the customer” initiatives or value mapping / attribute selection analysis leaves companies not enabling a powerful market based message.
9. Lack of clear executive commitment to price.  Too many short term initiatives and too few resources often lead to operational paralysis and no clear leadership on how to capture value through the price lever.
10. Lack of Pricing Strategies, Policies & Processes to support organizational behavior.  Limited clear concrete messaging often leaves loopholes of operation and limits the rigor in price deployment.

In conclusion, a large number of Mid-Market customers continue to go un-served by the Pricing Industry as training, education and marketing are too often oriented toward larger customers.  That said, given the points made above, the “need” appears to be greater for the Mid-Market segment and the potential returns that much higher.  With the proper focus on information dissemination by the Pricing Industry, the right tools, solutions and services provided for quick wins with commensurate plans for long term change, the future can be bright for all Mid-Market customers wanting to find greater price competency.