The Makings of a Pricing Professional
The Makings of a Pricing Professional
What does it take to become a pricing professional? What do hiring managers look for in new pricing analysts?
I was recently asked to participate in developing potential pricing curriculum for a university graduate program. The curriculum was to be definitively cross functional, engaging the economics and marketing departments and requiring foundational courses in finance, business strategy, accounting, and other fields.
We could have simply slapped in a few existing econometrics and consumer behavior courses to define the curriculum, yet I suspected the needs of the hiring managers in pricing go beyond the concepts and skills taught in most business courses.
I had my list of skills, attitudes, and behaviors that I look for when hiring a pricing consultant, but I didn’t want to fall afoul of overconfidence and availability biases. So, I took it upon myself to conduct a market research project using Snowball Sampling with In-Depth Interviews.
I polled several senior pricing professionals. These people had titles that included words like Vice President, Director, or Leader along with the domain of pricing.
After explaining my objective, I asked: What do you look for in a newly minted graduate student when hiring a pricing analyst or manager?
At a high level, senior pricing professionals …
- Would love to be able to hire people properly trained in pricing.
- Seek soft and hard skills required to succeed in pricing.
- Hard skills refer to the quantitative and other abilities that are typically taught in a course. Yet hard skills were clearly not enough.
- Hiring managers also looked for soft skills regarding behaviors and perspectives.
These findings were useful but challenging. They implied that the graduates of the program would be in demand, thus elevating the prospects for the students and the university. They also implied that the simpler path of slapping existing courses together to define a new curriculum would be insufficient. The pricing curriculum would need to deliver domain specific knowledge as well as prepare students to thrive in business.
Diving deeper, senior pricing professionals identified specific skills and traits they desired in new hires. These are listed as follows.
Hard Skills in Price Management
Business and Consumer Markets
- Breakeven analysis, profit impacts of price changes, read a profit and loss statement and detect the impact of pricing on profits, measure the impact of pricing decisions on corporate performance.
- Numeracy in being comfortable with numbers and able to communicate quantitative data both visually and numerically.
- Behavioral economics, negotiation theory, and other specific skills such as selling or project management.
- From a data set of purchase data, usually collected via retail scanner data, calculate the elasticity of focal products and the cross elasticity of those focal products with their substitutes and complements. From the elasticity and cross elasticities, project expectations of the outcome of lowering or raising the price (perhaps through a promotion or a price change).
- From a data set of sales data, often collected from historical transactions at the line-item level, use statistics, both graphical and numerical machine learning, to predict how prices on a focal product or product group vary between market segments, customer situations, and customers. From this study, project expectations, at the customer-line item – situation triplet level, of the expected average price, high price, and low price.
Hard Skills in Price Setting for both Business and Consumer Markets
- From measurements of Economic Value to Customer, Gabor-Granger, Van Westendorp Price Sensitivity Meter, and Conjoint Analysis to identify the optimal launch price of a focal product. Consider competing price structures (business models) and strategies to define the optimal launch price strategy for the company given the CEO’s goals.
Soft Skills for both Business and Consumer Markets
Persuasive, Decisive, Diplomatic
- Hold collaborative discussions with peer executives in sales, marketing, and finance, each of which may have a different agenda, to drive consensus around a strategy that is likely to deliver the desired outcome.
Ambiguity, Curiosity, Inquisitiveness
- Be comfortable with ambiguity and uncertainty with the knowledge that a single measurement fails to tell the entire story. For instance, a promotion may have under-delivered, but it may be due to low channel participation rather than something in the promotional price decision. Detect the potential underlying exogenous variables that impact the outcome of a decision, not simply the endogenous variables.
Confidence with Humility
- Good pricing decisions are like spy craft. They require assembling many measurements and facts into an information mosaic from which an intelligence assessment is made (that is, a decision). Accept that one may not have all the facts at the time of decision making, and waiting until all the facts are collected (analysis paralysis) will lead to failure. Instead, form your hypothesis and be prepared to test it in situ.
Acting on Facts
My market research on what hiring managers in pricing desire in new pricing analysts is useful in determining what must be done.
For students: if you want a job in the growing pricing field where the demand for your skills is high, get comfortable with both business cases where the right answer may not be the obvious answer and there may be multiple “right” answers, and with the underlying tools of machine learning and artificial intelligence: statistics.
For aspiring pricing professionals: the demand for people with the aforementioned skills is high, but the list of required skills is broad. Get started on the path to knowledge and demonstrate your proficiency as you progress.
For hiring managers: the research provides a crib sheet of what your peers demand. I am confident you could add to this list, but it is a good starting point.
For universities and academics: slapping together existing courses in game theory, managerial economics, and marketing analytics is insufficient. We need new courses and new learning material. (There may be books that need to be written.)