Any organization can conduct a pricing diagnostic with some simple planning and by taking a structured approach. But here are some common roadblocks and challenges to keep in mind:
- Concurrent initiatives and conflicting priorities. Pricing and profitability transformations require greater focus than many other initiatives. This is primarily because pricing is an often contentious topic that touches almost all aspects of a business. The complexity of the diagnostic needs to be carefully assessed so that sufficient time and resources are set aside to allow most functions to be included and the necessary discussions to be held.
- Survey execution. The execution stage can be unexpectedly complex. While initially only a small number of participants—and questions—may seem to be needed, this can change quickly during the planning stage. Stakeholders may disagree strongly on what questions to include or how to word them. Special care must be taken to ensure that the results will be meaningful (i.e., ensuring questions are relevant) and available (i.e., obtaining a sufficient response rate). Participants will likely need to be reminded repeatedly to respond to the survey.
- Survey and interviewee gaming. All current state assessments run into the problem of participants not wanting to admit (or believe) they are doing their job incorrectly. Therefore, when asked about the state of existing processes, they will usually respond according to what they think the inquirer wants to hear. Answers should be carefully scrutinized to identify misleading or errant information: this can be accomplished by triangulating responses from multiple stakeholders or data points.
- Leadership exposure. Pricing and profitability transformations inherently expose gaps in a business's capabilities. As the primary metric of success for any organization, exposure of profit mismanagement can lead to highly contentious exchanges and be potentially embarrassing. Some executives are uncomfortable with the level of transparency that accompanies this kind of initiative. These emotions can be combated by fully briefing leaders upfront. Blind-side communications should be avoided at all costs, and anonymity should be preserved at all times.
The value of a pricing and profitability management diagnostic has been demonstrated to far outweigh any challenges encountered along the way. Well-conceived pricing improvements can have benefits to the bottom line almost immediately, while ill-considered transformational efforts can ruin profits just as quickly. Managers must take steps to ensure that they understand the depth and breadth of their organization's pricing capabilities before engaging in a wide-scale improvement initiative. An effective diagnostic can help organizational leaders to develop that understanding.