Customer-centric pricing involves assessing product attributes, customer perceptions, and market conditions while actively listening to customers’ actions continuously. It aims to ensure that companies accurately evaluate the value they provide to customers and effectively leverage it in the marketplace. The idea is to push towards establishing a more just and open marketplace where all individuals can have an equal chance to make informed buying choices. 

How to ‘democratize pricing’?

Annie Wang, Director – Pricing and Analytics at PPG Industries AC and AIXC Member, spoke at length about it with Maria Wang, Pricing and Commercial Strategy at KPMG.  

Here are some excerpts from the interview:

In today’s environment, with inflation, economic slowdown, input cost increase, and so on, companies are adjusting their strategic, operational and sales plans. What is the role of pricing in this adjustment? How do you see pricing doing in this paradigm-shifting time? 

“I do believe pricing should play a vital role in terms of how we quickly align to the market reality. First, determine supply, demand, and price sensitivity for each segment. Then, decide which segments to grow and adjust the pricing accordingly. For instance, if a low-share segment needs penetration, pricing, sales, and marketing teams must collaborate. The pricing team should provide granular insights, such as pricing strength and recommendations for volume growth. The pricing team must integrate with the supply chain and sales to ensure an end-to-end view, not just siloed perspectives.” 

You brought this up before that pricing needs to play a bigger role as an integrator in connecting different functions. How can pricing drive cross-functional excellence in business execution? 

“Pricing goes beyond simply giving a number. It involves connecting the cost, customer value, and competition. The finance and accounting teams own the cost, while the pricing team helps articulate trends in costs. The pricing team needs to translate internal costs to customer value and communicate with various partners and stakeholders. They need to articulate value clearly to build pricing confidence within the sales team.

Competition is also a crucial consideration. A well-thought-out and executed pricing decision can achieve long-term goals and helps glue multiple functional teams together. The pricing team also has a role in resolving pricing disputes and ensuring the right amount of money is collected.” 

For the sectors that PPG is in, i.e., specialty chemicals, paint, or coating chemicals, there can be many SKUs in different B2B or B2C channels. Do you have any ‘secret sauce’ to manage high complexity in pricing? 

“There are four things I constantly talk to my team about. 

Understanding the business, the customer, being strategic, and improving agility through these four principles can simplify complexity and lead to success. 

I remember some advice from one of my mentors: lead the team to transcend complexity by simplifying it into digestible messages for everyone to understand and feel in control.” 

In the face of paradigm-shifting events such as inflation and economic slowdown, pricing plays a crucial role in adjusting strategic plans and aligning with market reality. By connecting costs, customer value, competition, and marketing messaging, pricing teams can help integrate different functions, drive cross-functional excellence in business execution, and achieve long-term goals. The role of the pricing team is critical in bringing together multiple functional teams and ensuring collaboration in major activities, both internally and externally. 

Sources/Bibliography:

https://www.linkedin.com/pulse/democratize-pricing-episode-2-z-maria-wang-phd/