Pricing strategy is one of the most critical strategies a company can undertake. A good or bad decision can make a multi-million-dollar impact. David Mok, Director of Pricing for Verizon Business Group, shares his approach and thinking on an approach to pricing strategy.
David and I recently sat down for the following Q&A:
1. Why should companies consider building a pricing practice? The impact is obvious. In a $1B company that misses a 5% pricing edge will leave $50M on the table. Historically, a 1% improvement in price yields over 10% 
improvement in profit for the average company. If these numbers matter and your business is struggling to get the rightful price while taking nearly every deal at whatever price you can get, your organization is overdue for pricing capabilities.
2. How does a company get started? The journey of a thousand miles begins with a single step. That first step is recognizing the significant impact of pricing excellence. The idea is to gain a perspective of WHAT “BEST” looks like. One should assess the current state in five areas then develop a five-year roadmap.
- price strategy
- price setting
- price getting
- pricing analytics & reporting
- governance
3. What are barriers to pricing excellence? In every company, barriers are erected over time, where activities & priorities are entrenched, and unfortunately, pricing takes a back seat. The journey to pricing excellence is about managing change. Change is hard. Nearly 70% of change efforts fail. Furthermore, the bigger the change, the more leadership is required. That’s why building price excellence is not a simple assignment.
- Most organizations don’t have a clearly defined or aligned price strategy.
- Pricing capabilities are broadly lacking and ineffective.
- Deeply rooted share driven culture trumps efforts to defend price.
4. How did you overcome these barriers? Bring to bear skills of change leadership, expertise to elevate commercial strategy & capabilities, creative business innovation, and transformative process improvement.
Define your strategy and get alignment
- Start with BIG PROBLEMS trying to solve
- Rationalize portfolio positioning (good, better, best – pricing power)
- Create defensible discount policies and rules
- Strengthen go-to-market pricing strategy (pricing issues begin upstream)
- Create a plan to drive performance (price align to goals & how do you win)
Build pricing capabilities for impact
- Hire, educate, and influence people
- Transform the pricing process (strategic side, deal side)
- Deploy technology as decision support tools
Champion the new pricing culture
- Culture eats strategy for breakfast
- Executive alignment on decision priorities (profits)
- Plenty of 1:1 afterwards with sales
5. What were the impact of these pricing initiatives? The win-win can be large. Here are a three specific industry examples I’ve directly seen in my career.
- Semiconductor: 800% increase in channel price book execution = $50M
- Data Storage: $200M hike in profits and 500% GPM increase
- Med Tech: $65M annual profit increase by improving price attainment
6. Any final advice to our viewers? Keep in mind this is a multi-year transformation journey and a successful end always begins with that FIRST STEP.
- Get started on your journey by picking a category you are in control or have ownership.
- Deliver quick wins and share your stories.
- Secure support for another category, and keep the journey moving.
Watch full video interview here
Contact David via LinkedIn or his Career WebFolio page.
Fred Coon, CEO
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