April 15, 2014
You all know the persistent, intermittent sound of a dripping faucet while you’re trying sleep. There is a long pause while the droplet wells up at the bottom of the spout and in your fatigue you reason that it’ll probably stop soon and there’s no need to call a plumber. Now contrast that dull plunk with the horrendous shrill buzz of a smoke detector whose battery is on the fritz. At a distance it’s an obnoxious chirp, but overhead, the noise is so annoying it can wake you up out of a dead sleep. Three to four beeps in and you’re either out of your warm bed, rummaging through your junk drawer, swearing to keep D batteries on hand, or you’ve unceremoniously ripped it off the ceiling and removed the battery altogether, fire hazard be damned. The difference between these two noises is that, although both are persistent and obnoxious, one drives a sense of urgency and prompts an immediate response.
Having recently been reminded of the action bias of the smoke alarm noises I began to wonder if we were perhaps doing pricing a disservice by referring to “profit leakages” with an array of terms more similar to the faucet noises than the smoke alarm. It’s not difficult to convince someone that pricing is an important function within a business, but it does seem to be tough to instill the right sense of urgency. Profitability improvements are getting stuck in the Important, but Not Urgent quadrant of Steven Covey’s 2×2 matrix and I think our terminology and style of communication may be one of the reasons for this.
My question to you, is what are you doing to change the discussion at your company around pricing and value realization initiatives so that you are successful in adopting new processes, tools and mindsets? A lot of Pricers feel like this Lego guy holding the wheels in an organization pulling a heaving sled uphill.
A lot of our tools and techniques are no longer novel and untested, but for some reason it’s hard to get an organization motivated to put aside other urgent tasks long enough to snap the wheels into place. Statistical pricing segmentation, targeted list pricing and other examples of data-driven decision making are proven tools for margin improvement, so why aren’t more companies adopting these methods?