Having gotten insight from top pricing recruiter Chris Herbert, we reached out to pricing thought leader Tim J. Smith to get his insights into the skills needed for pricing expertise. Tim is the CEO of Wiglaf Pricing and his books include Pricing Strategy and Pricing Done Right. To widen our perspective, we also spoke with top sales coach Reg Nordman of Rocket Builders.
This interview is part of the joint Ibbaka and TeamFit research project on skills for pricing excellence. Ibbaka is interested in this as we are scaling up our own pricing practice and deepening our skills base. We need to know what is coming and what skills we need. We are also interested in supporting the general growth of pricing expertise, as ‘the best customer is a well informed customer.’
The results of this research will be presented at the Professional Pricing Society Spring Workshops and Conference in Chicago May 1 through 4.
Ibbaka: What are the critical skills for pricing expertise?
Tim: I am seeing a divergence between the retail space and B2B.
In retail, the skills are driven by the need to understand data about market segmentation, competitor actions, consumer response and so on. Increasingly, the skills used here come from computer science – algorithm design, artificial intelligence and machine learning, data science are generally all critically important.
It is quite different in B2B. Here there is often a lack of data, especially of competitor data. What is most needed among B2B pricing experts is the ability to have a discussion at the board level. This requires a broad knowledge of business and strategy and not just analytical skills. Emotional intelligence is needed.
A B2B pricing expert needs to be able to create and manage the agenda on how to increase profit, which is often a key goal of pricing.
Ibbaka: What are the skills that differentiate the really superior pricing consultants from the crowd?
Tim: An understanding of business innovation and business models. The top pricing consultants have a strategic point of view on how to make a business successful. They are able to support the business as it considers innovation and new product lines, new market opportunities, and even merger and acquisition activities.
The top people go well beyond the pricing optimization and revenue management concepts that are often taught in the operations courses at business schools. They know how to optimize price structures to drive strategy. These people are needed in the retail and B2B spaces.
Ibbaka: Do you see pricing as a team activity?
Tim: Yes. Good pricing leaders understand team dynamics. They can build and lead teams, and they can also work well with the leadership teams at their companies.
Ibbaka: What are the biggest skill gaps?
Tim: People still lack even the basic skills. There is a general lack of pricing knowledge even among pricing consultants. Some cannot even explain the difference between conjoint analysis and Van Westendorp or think they are interchangeable! Most people do not have basic analytical skills and lack an understanding of basic pricing techniques.
Ibbaka: Are there also gaps in more advanced skills?
Tim: That is harder to answer. In developing my own team I look for three critical things: math skills, emotional intelligence and curiosity.
My firm is often dealing with smaller companies that do not have their own pricing teams so we have to be able to work with people who do not know the basics of pricing.
Ibbaka: How is pricing expertise going to change?
Tim: I think Ernst-Jan Bouter has some good insights into this. In his book Pricing: The Third Business Skill, he suggests that pricing will become a C-level role. There will be Chief Pricing Officers, or their equivalent.
I did not used to believe this, but it is happening, if slowly. For example, Eastman has developed a distributed pricing function and has 80 or 90 people working on pricing in different parts of the organization. That is a pretty large team and the leader is definitely an executive. For pricing people to reach the C-suite they need to move beyond pricing consulting to leadership positions with broad accountability.
Pricing may be part of marketing, but it is very different from marketing communications. It integrates skills from marketing, sales, legal and financial functions. Very few people have the range of skills and integrative thinking to do this.
Not all companies will make pricing a C-level position, but they will need to start dealing with it at the board level.
Ibbaka: What question should we have asked you but did not?
Tim: Hmm, I guess it is ‘How do you train people on the core pricing skillsets?’ We are still struggling with this, despite all the books, internet resources and the work being done by the Professional Pricing Society. We are finding it hard to fill the gap.
The Pricing Strategy book is mostly for pricing analysts. When I teach it I find that many people do not have the math skills needed to really work through it. The Pricing Done Right book is for business people who need to know the basics and what good looks like.
The approach we are taking at Wiglaf is as follows.
Year one, a new MBA is expected to read the Pricing Strategy book and become a Certified Pricing Professional (CPP). At this point they move from Pricing Analyst to Consultant.
Year two, I have people learn sales skills, we use the Miller Heiman training. A person who cannot sell will have a hard time consulting.
Year three, I give them project management training and get them to go out and close deals. By this point they should also be building up some specialist skills and industry knowledge.
I also expect everyone to be able to write. This is central to communication. I ask them to write ten articles a year for The Wiglaf Journal.
Hopefully all this experience cultivates not arrogance but humility.