Pricing and the growth mindset
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.
I have been reading Jeff Robinson’s excellent new book Price for Growth. I will have a lot more to say about this book and his “five sacred metrics for pricing success,” but in this post I would like to dig deeper into what I think is one of his most important points, that we should approach pricing with a growth mindset.
Before that though, I would like to acknowledge how he begins his book, with a tribute to his late colleague Michael Davis. I did not know Michael Davis myself, he was at PROS before I began to work in pricing and he worked mostly in the manufacturing sector, while my career has been mostly in tech. But Jeff’s description of Michael’s character and ideas is compelling, and is itself I think related to the very special way in which Jeff represents the growth mindset.
Jeff looks for the opportunities around him and sees many of those opportunities as ways he can help other people.
The growth mindset
The growth mindset has gotten a lot of traction over the past few years. I first heard about Carol Dweck’s work in the context of angel investing, when an older and much more experienced investor told me that the only way to succeed in early stage investing was with a Growth Mindset. A defensive, or as Carol Dweck would say, a Fixed Mindset, would lead to poor investment choices when acting in a space where most investments would fail and a few return disproportionate wealth.
Infographic from the fs website article on Carol Dweck: A Summary of Growth and Fixed Mindsets
So what is the growth mindset and how does it differ from a fixed mindset?
A person, or a company, with a growth mindset is open to learning and is willing to make mistakes in order to create opportunities. They embrace challenges and persist in the face of setbacks. The growth mindset assumes abundance.
A company, or person, with a fixed mindset is living in a world of scarcity. A world in which one cannot afford to make mistakes where challenges are best avoided.
Pricing and the growth mindset
So how does one apply a growth mindset to pricing?
I shared my thoughts on this almost a year ago in a post How to negotiate price (getting to positive-sum pricing). There I argued that the best pricing strategies, and tactics, are those that move pricing to a positive sum game. A game in which both parties, and even the community at large, are winners. An obsessive focus on price optimization leads one to a zero sum game, in which what one player wins the other loses. Price wars often result in negative sum games, where both parties lose.
Jeff Robinson’s insight runs deeper. In his book he argues that a short term focus on profit optimization, as the goal of pricing, is likely to lead to lower profit growth over time.
Jeff’s list of Growth mindset thinking is a follows …
Opportunities are abundant and can be found everywhere.
Possibilities are infinite and unlimited.
There is more than enough to go around, so long as you are willing to find it.
There is room for everyone to succeed.
Innovation is multiplicative and two heads are better than one.
Every experience is a learning opportunity.
Change is a vehicle to learning and progress.
Collaboration leads to win-win outcomes.
Everything will eventually work out in your favor if you persevere.
The success of others is connected to your own individual success.
From Pricing for Growth, page 38
As you work on your pricing strategy for 2022, do so with a growth mindset. Ask …
What pricing actions will help your company grow in the ways that are most meaningful
What do you need to learn about pricing dynamics for your offers in your markets
What can you learn from what is happening in other markets, in other industries
Asking these three questions will lead to a growth centric pricing strategy. One based on confidence that you are learning what you need to learn and that the actions you are taking will contribute to growth.
