Are you applying best practices in your pricing?

Take a


Lessons from the Professional Pricing Society Spring 2018 Conference


Three of the Ibbaka team were at the Professional Pricing Society 29th Annual Spring Workshops and Conference (Karen Chiang, Steven Forth and Rashaqa Rahman). As always at these events, we learned a great deal and met some fascinating people. We would like to share just a few of the high points.

But first, a big thank you to Kevin Mitchell and his team. The event was well attended with almost 500 participants (a good economic indicator itself). It was well organized and had lots of great content. The Fall Conference will be October 23-26 in Houston Texas.

Ibbaka gave a presentation on the work we have been doing with TeamFit on the skills of pricing experts. We will be publishing a full report on this work later this month. TeamFit recently published a blog post on this work that has a number of useful links. The skills of pricing experts - skill insight research. One important question that came up during the discussion was one of process. One of the keys to pricing expertise is to have a good, repeatable process. One that you can apply again and again, build benchmarks, and continuously improve. It is not enough to understand the core concepts and to have the critical skills. You need to have a process too. We will dig into this point in future research into pricing expertise.

Tim Smith from Wiglaf Pricing gave one of the keynotes on Thursday morning. His focus was on commercial policy and pricing governance. The best part of this excellent presentation was his framing of the pocket price waterfall. In what he calls Collaborative Price Management, Tim showed how different parts of the organization are responsible for different parts of the waterfall, with the product owner often leading the setting of the list price (and the overall pricing architecture and design), with sales owning the discounting policy and finance controlling the application of logistics and payment terms. Using the Pocket Price Waterfall to clarify governance seems like a very good approach. (Check out our recent interview with Tim Smith).

Brad Soper from Simon Kucher & Partners covered the impact of digital transformation on pricing. There was a lot of talk about digital transformation about the event, but the SKP team has done the best job on linking this to pricing strategy. Being consultants, they needed a 2 x 2 matrix (we like to use these too as they can help frame abstract concepts). In the SKP matrix, the Y-axis was the standard one of how far have you gone in your digital transformation. The X-axis asked about monetization. Have you applied digital transformation to your pricing and monetization strategies? To get into the top right quadrant you have to have both implemented digital transformation across your company and worked out how these impact your pricing and monetization. Digital transformation opens many new revenue and pricing models and to truly reap the benefits of investments in digital these need to be leveraged.

For both Karen and me the high point of the conference was the presentation by Caspar de Bono of the Financial Times on their journey from a a print publication reliant on advertising revenue to a digital mashup of content, software and data that gets most of its revenue from subscribers. Caspar also hosted an engaging town hall as one of the very last sessions at the conference.

This was (I believe) the third presentation that Caspar has given on the Financial Times journey over the years. It was a very hopeful talk, and showed how hard thinking about value creation, value and pricing models, when combined with good data analysis, can transform a staid old business into a digital leader. It is a great example of a company that belongs in the upper right of the SKP matrix.

The outcome - the Financial Times is profitable and growing. It has been able to increase investments in journalism and editorial content. Let me repeat that. Compared to the days when the Financial Times was an advertising driven print publication, it now has more people doing research, writing articles and creating content. It has also added people who develop interactive content, data analysts and software engineers. Investment in the quality of content has continued as the FT is able to rely on its readers, and not its advertisers, for revenue.

How did they do this? There are many stages to this story, with critical decisions being made along the way. Caspar shared a wonderful slide that tracked the critical decisions and outcomes across the years. We should all keep maps of our decision journeys and review them from time to time. One of the keys, though was to get a data driven understanding of what drives engagement. They used the classical formula for engagement: frequency of use, volume of content used, recency of use. The equation for this is Engagement Score = Frequency x Square Root of Volume over Recency +1.

Engagement Score

This is an example of something that we sometimes call Predictive e. The most important measures of engagement are those that predict future engagement (see Predictive e: the future of engagement metrics). In these early days, it is difficult to use this kind of metric as a pricing metric (that day will come). What the Financial Times did was to run their numbers and find that when a user views nine articles in a month they are likely to become hooked and demonstrate a willingness to pay. They used this to build an Engagement Pricing model for their B2B customers. Is is worth spending some time on the Financial Times Pricing Page to get a feel for how this is presented to buyers.

An interesting aside, Caspar de Bono is the son of renowned writer Edward de Bono, who write the groundbreaking book on lateral thinking and has recently published Bonting: Thinking to Create Value, which I will have to look into.

Ibbaka intentionally combines pricing science with design thinking, and our basic approach is not to set or optimize prices but to design pricing (see Don't Set Prices. Design Pricing!). The Engagement Pricing approach of the Financial Times is itself a good example of lateral thinking and pricing as design.

There were many other great presentations at the Spring Professional Pricing Society conference. The most interesting presentations generally dove deep into a practical problem and showed how it was solved. We are looking forward to the next events in Houston and Amsterdam.  The Professional Pricing Society is a great place for pricing professionals to build relationships, share ideas and generally take our work up to the next level.

Ibbaka privacy policy