Pricing

Don’t Get Trapped in a Penrose Stairs Part 1: The Crossroads of Your Pricing Journey

By Matthias Mueller
June 3, 2014

You have established a well-structured pricing process that enables you to pro-actively manage Pricing and execute consistently on your pricing strategies.

Your pricing organization/teams gained extensive experience, and pricing received a lot of attention from the entire organization. The new in-depth analytical insights you’ve gained drive you to think about pricing in a new way ….considering all factors that impact profitability.

You are excited about climbing up the pricing competence stairs, drilling into more specific and sophisticated profit improvement areas as you believe the pricing and sales teams are executing well and able to walk on their own.

Stair1

But, what if you figure out that instead of climbing UP, you are actually trapped in an infinite loop of pricing process refinements? In essence, you’re climbing up ‘Penrose stairs’.

Stair2

I was faced with a situation like this recently when I was approached to provide additional consultancy and training to one of our customers. They wanted to take full advantage of value capturing, while also assessing additional profitability opportunity areas, so they could take the next step on their pricing journey.

Phew! This was a tricky one. Based on my observations during project kick-off and my project objectives discussion with the customer’s core pricing team, I was absolutely certain that adding new ‘toys’ to play around with was not the right approach at this stage (pricing responsibility was still in transition from the initial IT department to the business).

So, I drew a line, took a few steps back, and:

– Re-emphasized the steps it takes to not just identify profit opportunities, but furthermore, to understand the root cause in order to define and track corrective actions to capture the opportunity value

– Highlighted the importance of having clearly defined pricing responsibilities as well as functions in place to drive/capture identified profit opportunities

– Recognized the need to demonstrate the organization’s capabilities for capturing “low hanging fruits” to:

– document realized Return on Sales and

– Increase the awareness and momentum,

…before moving on

It became obvious that pricing stakeholders did not fully buy into basic pricing strategies, causing a high risk of inability to consistently implement new pricing strategies across the organization’s businesses and geography – a high risk of getting trapped in a Penrose stairs.

I was invited to give my final presentation three times to evangelize the teams and make sure they fully bought into this concept: understanding the importance of a repeatable, consistent and efficient way to stay on the right path, ensuring ongoing and sustainable value capture – to pave the way towards success and eliminate the risk of getting caught in a Penrose stairs!

The customer, quite impressed, noted:

“…with your help, we finally were able to convert bystanders into true promoters.”

“Your step by step instructions [are] boosting our capacity to replicate fast.”

“Very good focus on what is needed in order to capture the full opportunity potential.”

Watch out for my next blog – Part 2 – where I will provide best practices for escaping the Penrose stairs and ensuring a successful pricing journey.

And, if you want to learn more about getting started on your pricing journey with the latest tools for profit discovery, while also having the chance to discuss this with me live, register today and join me for a live German webinar on June 5th, at 5PM (GMT+2).

  • B2B Pricing , penrose stairs , pricing best practices , Pricing Journey , Profit Discovery

    Matthias Mueller

    Matthias is a pricing practitioner with over 16 years of experience in practical and strategic pricing in B2B. During the last three years at Vendavo, he has helped customers across industries adapt and implement best practice pricing strategies, quickly ramp-up/enhance their analytical skills and improve pricing effectiveness and margin performance.