The Importance of CEO Buy-In
Why do pricing professionals get into pricing in the first place? I understand that some people are thrust into a pricing role despite not exhibiting any preexisting pricing proclivities. In many cases, these naïve new recruits have no idea what they are in for.
For myself, it was much the opposite. I did not fall asleep at my desk one day and wake up in a pricing role (complete with new business cards and a primer on Excel functions). Rather, I actively sought out a career in pricing once I began to appreciate the sheer power that pricing can have on a firm’s profitability.
Ultimately, I got into pricing because I wanted to make an impact on organizations, and I saw pricing as a perfect conduit for that goal.
However, I should take care not to disparage those naïve new pricing recruits I mentioned above too much. In all honesty, I was quite naïve myself, and I had no idea what I was in for. To start with, I initially thought that my purpose in my pricing career was merely to solve math problems.
A famous philosophical thought experiment asks whether a tree makes a sound when it falls in the forest if nobody is around to hear it. I should have borrowed this famous question, modifying it for my pricing-centric purposes: does it make a difference when a math problem is solved on the pricing team if you still don’t have buy-in from the CEO?
The answer is: NO. No, it doesn’t make a difference. In fact, nobody cares how many math problems you solve if you don’t get CEO buy-in.
Pricing projects do not always go well. In fact, some of them go horribly awry. Pricing projects are difficult. Pricing projects get messy. Pricing projects will ruffle feathers. And out of everything that could sink your project, failing to get CEO buy-in is an oversight that will almost certainly lead to failure.
A top decision-maker is key
Pricing projects require you to balance the needs of numerous departments, some of which frequently find themselves actively working against each other. (I’m sure you’ve never seen this with Sales and Finance, right?) Having different departments and the personalities in them at loggerheads is just par for the course on a pricing project.
You have to work through the tangle while you consider and balance all the various incentives of your cross-functional team. There are times in which agreement is elusive. Maybe your team can’t agree on whether to scale back a long-running discount, like free shipping with no order minimums. Or maybe your team disagrees on whether your pricing structure needs adjusted to share more value with your strategic accounts.
If compromise is not possible, you need a single decision-maker to make a judgment call so that the project can continue. That single decision-maker should be the CEO. And considering the power that the CEO has, you want to ensure that they understand the impact your pricing project can have if they just trust the process and fully engage their team with it.
You will need consensus and cooperation for your pricing project. And if you don’t have support from the company’s top decision-maker, then your pricing project will be a failure.
Work on your soft skills
So how does one move from being a number cruncher to being a trusted advisor of the CEO?
Well, start by recognizing that you can’t just deal with the numbers. Pricing is about more than just numbers. Pricing is about people. Pricing is about the perceptions and behaviors of people. And more than just your customers. Don’t forget about all the people on your team. And certainly don’t forget about all the people on the other teams (i.e., your competitors).
But for right now, you have to focus on your CEO. I guarantee that you have something of value to offer to your CEO. You may even have an insight to offer them about that issue that they have been losing sleep over recently. But do you even know what that insomnia-inducing issue is? (Pro-tip: asking directly will speed things up. Open-ended questions also help.)
That’s right: I’m encouraging you to take time to listen if you want to actually communicate more effectively. This can help you in several ways: 1) learning what your audience wants to hear about; 2) figuring out what you have to say on that topic; and 3) determining how your audience will best hear that message.
Hard skills are great because they allow you to break down and solve quantitative problems. But in order to actually do anything impactful with your solutions, you will need to influence other people. And influencing people requires soft skills.
Forget about “the perfect price”
When seeking CEO buy-in for a pricing project, I would also caution against trying to find “the perfect solution” or “the perfect price”.
That price will change again next year or next quarter (or sooner, depending on your industry).
Granted, I may be speaking entirely for myself here, but I find that seeking improved prices seems more manageable than loudly proclaiming that you have started your quest for the platonic ideal of this product’s price. You will find the One Price to RULE THEM ALL!!!
That sounds like a recipe for disaster to me, with a healthy helping of disappointment. Who do you think you are? The Sisyphus of Pricing?
Now, don’t get me wrong. I am incredibly diligent about getting my prices right. But I think it is folly to seek out an unattainable perfect price. Pricing is not a single-shot solution. It is a process. You will have to review it again in the future, and maybe you will find that you have further optimization opportunities.
But in pricing, as in so much else in life, take care not to let the perfect be the enemy of the good. Aim for improvement, not perfection. If you heed this advice, I’m sure that your future self will thank you for lowering their blood pressure.
Remember that your ultimate goal is to drive change by providing pricing insight and having critical conversations. You will not be able to drive change in a pricing project without CEO buy-in.