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Lessons in Pricing from 2020 and Trends for Success in 2021 

February 8, 2021

What Experts Learned from 2020 and Trends for 2021

While very few of us are sad to se2020 in our rear-view mirrors, its effects on how we conduct business has left ripples that will be felt in 2021 and beyond. We spoke to top pricing industry experts from around the world to get their thoughts on what they felt were the most important lessons of 2020 and what companies like yours can do to find success in 2021. 

In Your Opinion, How Has 2020 Changed the Pricing Industry 

Depending on which industry you’re in, there’s no doubt that you’ve experienced some changes in how you operate internally as well as with customers and partners. When speaking with our experts, we found a few key themes kept coming up – digital transformation, agilityprecision and confidence. Surprisingly, these themes are applicable not just in pricing but across multiple business processes. These changes also present opportunity for pricers to move pricing functions from an assumed given to a more strategic position that, with the right planning, can positively impact all aspects of business. Let’s see what they had to say. 

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Lydia M. Di Liello, Capital Pricing Consultants L.L.C. 

2020 actually did one good thing: it brought Pricing, as a discipline, clearly into focus for most companies. 

Pricing was often the “assumption” in most businesses, the thing that was taken for granted or passed over for more urgent and flashy content like sales promotions or targeted customer marketing campaigns. Pricing is also far more complicated and takes longer to measure the actual impacts than many other corporate initiatives. 

That changed in 2020. “What’s the price?” became the one unifying question as we all scrambled to see if we could get or maintain our supply chain. Could we ship what we were producing? Could we produce enough? All of those challenging issues ended directly back at “what’s the price”? Life was lived on a transaction-by-transaction basis. And every transaction has a price associated with it. 

Jose Paez, Solution Strategist, Pricefx 

The need for accurate, actionable data to inform decisions is paramount in this new age, most pricing activities prior to 2020 used to be relegated to side-projects with little push from leadership as a strategic driver, I think that has changed and businesses have started to realize that these pricing projects must be tackled with the level of importance and support that other areas of the business (i.e., quality, cost reduction, sales) use to be addressed with. 

Nathan L. Phipps, Wiglaf Pricing 

The dramatic changes of 2020 have elevated the importance of seeking profits and verifying offering-market fit. And there is less room for error  if you do not pay attention, your business may not be solvent this time next year! 

Additionally, discounting or rebating is not driving demand. You must instead focus on meeting your customer segments where their willingness-to-pay is RIGHT NOW (which could be higher, lower or the same as 2019). Firms that are slashing prices indiscriminately across the board could be hemorrhaging profits that they do not need to. As an example, airlines should not discount business class seats (their most profitable segment), and there might be some evidence to suggest they should not be discounting economy class either. 

Jochen Schmidt, Solution Strategy Manager, Pricefx 

As the pricing industry, as well as their target clients, were disrupted in 2020 by COVID, remote approaches, true SaaS, as well as the speed to adapt to changes has become even more important than it was before. Projects that depended on heavy onsite resources, which were consultancy driven were delayed, frozen or cancelled, while projects that relied on remote delivery and clearly defined SOWs were executed on time and often under budget. In addition to that, the need to be able to serve customers without any interaction made e-commerce as well as multi-channel strategies much more important and speed up trends in the market by at least half a decade. 

Joanne Smith, Price2Profits 

The vast majority of companies have been impacted by the COVID-19 pandemic and its devasting effects on the economy. While some have experienced positive effects, most have been negatively impacted.  Yet, whether effected positively or negatively, the common challenges they faced are an increase in;  

  • Uncertainty:  With constantly changing restrictions, companies and their customers have been kept on the edge of their seats trying to predict and manage through the market implications to their price and volume. The uncertainty in the depth and length of these pandemic driven market changes are potentially greater than most businesses have experienced in recent times. 
  • Inexperience in dealing with this unique challenge: To compound a difficult situation further, pricing (and business, market and sales) leaders are largely inexperienced in dealing with this unprecedented situation. They lack the confidence and pricing skills – strategy through negotiation – to make the best decisions. Not surprising as it’s been over 10 years since the last great recession and this pandemic situation is a far different animal. For companies without price management systems decisions are even more challenging. 
  • Less predictable competition:  With the uncertainty, inexperience and wide-spread decline in profits, it’s not surprising that some companies act out of fear.  Once disciplined companies may begin dropping price in the futile hope of gaining volume to recover profits.  

The result of all of this is a heightened need for improved pricing capabilities, confidence and pricing tools to enable smart pricing strategies through pricing negotiations in uncertain times. 

Venkat Vaidyanathan, Managing Partner, SPMG EMEA 

Power of being proactive vs. reactive has been brought to the fore – Organizations that have invested in improving their pricing maturity have been able to manage pricing much better than those that have not because they have the tools and processes to drive changes with agility. 

Increasing number of large and mid-sized B2B organizations march towards value-based pricing – in many sectors, the pandemic has significantly reduced the pace of investment in 2020, thus driving a reduction in budget allocation for new projects. Those who have wanted to invest have also been hampered by the implications of remote working, thereby postponing start of new projects.  

Converting data into information to drive pricing continues to be extremely important. We are starting to see more action in the machine learning driven price optimization space, especially in sectors like e-commerce, where market pricing data is very public and can be sourced through automation and AI. 

Jared Wiesel, Revenue Analytics 

“Do more with less” is the new mandate. As a result of the crises businesses faced in 2020, automation is more critical than ever, and pricing leaders cannot afford to continue with the resource-draining practices of continually debating what the “right” price is on a given deal or navigating endless layers of price exception review processes. 

This brings me to my next point: digital migration has been expedited. We see and hear this everywhere these days, and it is true in pricing as well. Manufacturers and distributors have mostly lagged behind other industries in their digital transformation, but customers are now demanding it, and that means pricing and related revenue growth capabilities must adapt to the high-speed self-service model. 

Finally, perhaps the biggest thing that sticks out to me in 2020 is something that’s been true all along but is now more critical than ever – there is no lever more powerful for a business to pull than pricing if they want to drive performance. Leading your way through this recovery will require pricing confidence and capabilities to proactively act and adapt as markets and customer expectations change. 

 

What Are the Implications of That Change Going into 2021 and Beyond 

The effect of 2020 on the pricing industry in 2021 can seemingly be summed up in one word: opportunity. An opportunity to move away from Excel, to provide the insights to other departments that positively affect the bottom line and to finally bring pricing to the forefront within your organization.  Our experts explain why these opportunities should be front and center in 2021 and beyond. 

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Lydia M. Di Liello, Capital Pricing Consultants L.L.C. 

As the marketplace has shifted its focus to pricing, the Pricing Industry has a key and unprecedented opportunity to showcase the transformational impact that intentional, controlled pricing can have. 

Kiplinger’s January 2021 issue “Where to Invest in 2021” noted that “profits from companies in the S&P 500 will be down 16% from 2019 levels.” 

In 2021, more than ever before, companies will be under intense pressure to produce results for shareholders and owners. Helping our clients see the aggregate impact of a multitude of individual transactions is powerful. 

I believe that organizations will be more open to learning about the ways the discipline of “Pricing” can help them achieve their corporate goals and targets in 2021 as a direct result of this focus. 

Jose Paez, Solution Strategist, Pricefx 

In 2021, there will be an increased need for companies to rely on actionable data, processes and platforms that can adapt to swift economic changes, both micro and macro. 

Nathan L. Phipps, Wiglaf Pricing 

In 2021, the spotlight is on pricing professionals to influence strategy and drive profitability. 

The nature of a K-shaped economic recovery (where some people and firms have extra cash on hand and where some people and firms are struggling) means that it is essential that companies take an individualized approach to price setting and management vs. using cookie-cutter recommendations for all customers. 

Pricing professionals must keep in mind that their market segments may have changed dramatically during 2020, and they are likely to change again in 2021. Furthermore, after the pandemic ends, these changes may either revert or prove to be permanent. The same thing goes for which customers are your most valuable customers. 

Jochen Schmidt, Solution Strategy Manager, Pricefx 

If there is one thing that is certain, it is uncertainty. Markets are becoming more transparent than ever – market leaders are already pushing into multi-channel approaches making their goods available 24/7. New customer touchpoints like marketplaces and APIbased integrations with third-party web shops are giving companies, with a centralized management system, the chance to drive traffic and conquer new markets quickly. This will enlarge the footprint in a growing channel and let companies capitalize on reaching their customers directly with offers. 

Joanne Smith, Price2Profits 

The uncertainties of 2020 will continue into 2021, at least through mid-year in the U.S., as we await vaccines, yet likely much longer as we await vaccines around the globe. Expect all of 2021 to be a pricing challenge – whether through the risk of further declines all year or the challenge of proactively managing through the transition to more normal times. 

Venkat Vaidyanathan, Managing Partner, SPMG EMEA 

Companies that have been proactively managing pricing will have the advantage coming out of the COVID-19 pandemic when the economy starts to improve. This will not only be in areas like margin improvement but also in market share gains as they have been able to react faster than competition. 

More B2B organizations are investing in value-based pricing projects and adding pricing resources in general. There will be a further drive towards dedicated pricing software to aid with price management in those complex organizations that have great processes but an IT toolkit that is unable to keep up. 

There is going to be further acceleration in the use of machine learning and AI in the price optimization/revenue management space across a wider range of sectors. Some of the larger ERP/pricing software companies will either develop these capabilities inhouse or through acquisitions. 

Jared Wiesel, Revenue Analytics 

The world’s most universal pricing tool, Excel, is no longer enough to keep up. Companies must navigate an increasingly complex web of products, customers, markets and external factors. Pricing automation with embedded intelligence will be essential to keep pace and deliver at the scale and granularity needed to win. 

This doesn’t mean that the role of the sales rep is going away, but it will change. They must be armed with more tactical, transparent and customer-relevant guidance to provide an increasingly personalized service. And as those customers shift online, companies must find a way to digitize the actions of their best reps – meaning, the ability to offer the same level of interaction and personalization of offers without intervention from a human being. That’s a massive shift from where many stand today, but they all know it’s coming and cannot afford to be slow to act. 

Finally, I believe there will be a “re-centering” of pricing capabilities and approaches in 2021. Most recognize the need and value of pricing science, but many have gone through failed pricing attempts before. Most often, it’s not the math that is off, but the fact that the approach ignores the human elements of pricing. As long as a human stands between the pricing science recommendation and a customer’s purchase, stakeholder adoption and buy-in will increasingly be put at the forefront of business’ focus, along with the science and technology. Recommendations that are business-reasonable, intuitive and adaptable will be more impactful than sophisticated math and decimal-point precision in the new world where confidence, speed and ease of doing business will win the day. 

 

What Is a Hurdle That Businesses Need to Overcome in Pricing This Year? What Can They Do to Achieve This, If At All? 

The previous section highlighted the opportunity that 2020 presented to pricing organizations. In this section, the experts have spoken and they agree that as you continue to prepare for 2021, your biggest obstacle will be getting the resources to implement the changes that your organization needs. Luckily, you don’t have to give up on this as they’ve given you the suggestions necessary to overcome that major hurdle and reach your goals – starting this year. 

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Lydia M. Di Liello, Capital Pricing Consultants L.L.C. 

Prioritization constipation. 2021 is the year of the competing priorities and lofty expectations of companies. 

Due to the extreme conditions of 2020, many corporate initiatives that were “important”’ disappeared from the radar during the Covid crisis. Now these delayed initiatives are resurfacing with urgency only to be blocked by a myriad of other projects such as manufacturing schedule alignment, sales promotions to pull demand ahead, HR initiatives to restaff, operations projects to cut production time and increase output – these initiatives will all be vying for attention and budget. The challenge for most companies is to prevent a pipeline of urgent projects, none of which get approved or moved on because they are all critical and high priority. 

Don’t let pricing become one of those projects that gets “stuck” and never acted upon. Be conservative in your metric predictions, including ROI and profit uplift for proposed projects. A conservative approach helps an organization feel “safe” in moving a project forward, especially in uncertain circumstances. Measure and report on agreed upon metrics monthly and communicate them clearly. This builds organizational confidence and excitement for the project. Make sure the numbers are meaningful and impactful. If you increased profit by 1% over the past month, measure it also in dollars and communicate it in dollars as a discreet number – $252,136 sounds far more impactful than 1%! 

Projects that demonstrate increased revenue and profit will have the highest likelihood of getting past the prioritization constipation in an environment focused on short-term revenue and profit uplift. Pricing projects have a definite advantage here. 

Jose Paez, Solution Strategist, Pricefx 

Most data prior to 2020, such as sales and economic trends, is no longer applicable as it used to be for forecasting. This, in turn, means there is a need for new and improved models for price optimization that do not rely so heavily on past performance. 

Nathan L. Phipps, Wiglaf Pricing 

Businesses need to proactively reassess their core assumptions about their market segments. However, for many businesses, this reassessment will have even more budget/time/resource constraints than usual. If a large-scale market research survey is simply not possible, then a pared down solution will have to do (e.g., in-depth conversations with your most profitable or most strategic customers). 

Pricing leaders will also have to make the best decisions they can with the information they have, and they will have to communicate the reality of that uncertainty openly and genuinely to their team if they hope to keep everyone coordinated and motivated. 

Jochen Schmidt, Solution Strategy Manager, Pricefx 

As markets are growing increasingly transparent, being in charge and having more information at hand than your customer is key to steering the right selling channels correctly. For example, a colleague of mine bought Bosch power tools. He searched on the web and got a good deal, finding all the tools he needed for 330€. By adding multiple items to his shopping basket, he received a free circular saw. When he went back to Bosch’s website, he saw that all the items he ordered would have come to about 600€  without the saw. Significant discrepancies in prices happen all the time and savvy consumers will take advantage of it. The good news is that companies can do the same by implementing strategic pricing in an omnichannel approach. Pricing is increasingly becoming a key driver to achieving sales and the pricer must be as savvy as the consumer to hit these goals. 

Joanne Smith, Price2Profits 

You need to have the pricing capability to act quickly and skillfully as the market and competitive dynamics change. Thus, if businesses have not already addressed this in 2020, they should consider the following: 

People capability: Enhance the skills and confidence of your strategic price setters as well as your sales team. Training courses, especially those designed as applied workshops, can be a fast and easy step forward. The right virtual applied training workshops with a cross-function approach (marketing/product line through sales) have proven to be quite effective. An alternative approach is using an expert consultant to co-develop your strategy and build the confidence of your sales team. 

Pricing analytics and tools: Step up your pricing analytics efforts to allow you to quickly see and proactively act on changes in price or volume. Further, step up your pricing management to ensure a tight discipline to policy. Analyses should be a critical part of your early warning system, yet your historical data may be a poor guide for future actions (given the very different market dynamics), hence the need for improved people capabilities along with strong price management tools. 

Venkat Vaidyanathan, Managing Partner, SPMG EMEA 

The biggest hurdle for businesses is to realize the importance of good price management, understand what ‘good’ looks like and act on improving it. This requires a forward-thinking organization and an investment driven by the top management. What we have seen, is inertia towards investing in price management, but those who do, typically seeing upwards of 10 times the return on the investment quickly. Even without a structured pricing capability, having pricing metrics should be part of the monthly sales calls and part of the sales objectives to start that journey. If you measure something, you can improve it and celebrate success. 

Poor data management continues to be one of the big hurdles in improving price management. Organizations need to invest time/resources in cleaning data to get one source of truth. Organizations should take time to understand what the best practices are and get assistance from experts who will speed up any projects and actions. When you have a solid process and structure to your data management, you have the solid baseline to drive pricing actions. 

Jared Wiesel, Revenue Analytics 

First and foremost, they need to overcome the status quo and finally act on improving their pricing. In the industries I work in, manufacturing and distribution, less than 20% of companies have any form of pricing capability beyond Excel. For a variety of reasons, most have chosen not to act in addressing their pricing pains. Those that continue to choose inaction will find it increasingly hard to keep up competitively, not to mention dedicate the resources needed to support the increasingly burdensome web of manual analyses, processes and governance many have in place today as a band aid. Of course, that’s easier said than done, and not just any solution and approach will work, so while they must act, they must also be sure to: 

  • define what success looks like for them 
  • agree on what resources and capabilities they need to achieve success 
  • identify where internal versus external support can best fill the voids 

 

And that’s it, as you plan for 2021, these expert insights should give you a better understanding of what you might be up against as well as the tools needed to overcome them. If you’d like to explore some of these topics further, you can reach out to our experts by clicking the relevant links below. 

 

About the Experts: 

Lydia M Di Liello, CEO and founder (with more than 25 years of global pricing and business leadership expertise) delivers exceptional results through Strategy, Process, and Technology. Profitability typically increases from 15%-300% in as little as six months. Client engagements range from global Fortune 500 to smaller privately held firms. Lydia is a well-know and widely respected speaker leading executive forums, conferences, and workshops worldwide; she is published frequently in trade and professional journals. Recently published in Manufacturing Tomorrow October 2020. 

Jose Paez is an analytics and pricing strategy enthusiast.  He believes in a focus on value and in delivery of results, challenging dogmas and trying even the craziest of ideas as long as the people behind those ideas are passionate about it. 

Nathan L. Phipps is a Consultant at Wiglaf Pricing. He is responsible for the training preparation and conjoint analysis for pricing projects. Nathan is dedicated to crafting recommendations to help companies manage pricing better. Before joining Wiglaf Pricing, Nathan worked as a pricing analyst at Intermatic Inc. (a manufacturer of energy control products) where he dealt with market pricing and the creation of price variance and minimum advertised price policies. His prior experience includes time in aerosol valve manufacturing and online education. 

Jochen Schmidt has gathered a decade of experience in the pricing industry. Working for multiple consultancy companies, building up strong strategic background but also implementing pricing software in various industries as an E2E project manager and configuration engineer, the combination of technical experience and strategic knowledge he owns is key and necessary in the pricing software industry. 

Joanne Smith, President of Price to Profits Consulting, is the author of The Price Negotiation Playbook, The Pricing and Profit Playbook and Pricing in a Crisis Playbook. She is the former DuPont Corporate Head of Marketing, Pricing and Customer loyalty.   With more than 20 years of global business, marketing, sales and pricing expertise, she now works with B2B companies. Joanne is on the faculty for the Professional Pricing Society (PPS) and The Institute for the Study of Business Markets (ISBM). She is best known for her practical, pragmatic approach and her ability to build courage, confidence and conviction in businesses/commercial teams to take bold pricing actions. 

Venkat Vaidyanathan is the Managing Partner at SPMG EMEAHe is a pricing expert with global experience driving tangible improvements in margin and pricing. Venkat uses a data-driven approach and relies on best practices in strategic, operational, and tactical pricing. He has a long experience in both formulating and implementing commercial strategies for B2B and B2C clients. 

Jared Wiesel has 20 years of Pricing and Revenue Management experience helping Manufacturers and Distributors successfully sell the right product to the right customer at the right time for the right price. With an intense focus on delivering data-driven recommendations that are business reasonable, strategically aligned, and adopted across the organization, Jared has partnered with many Fortune 1000 companies to drive profits and efficiency gains through better pricing.   

 

 

Tolu Oke / Content Marketer

Pricefx

Tolu had 5 years of experience with content planning and strategy and got her start with inbound marketing.

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