Wendy Johnson’s Take on Talent Acquisition and the Value-Based Framework
Who should a company hire to get pricing done right?
Wendy Johnson’s Recommendation:
The company should look to build their pricing team to fulfill four distinct functions: Strategy Definition, Price Setting, Data Management, and Deal Management.
Pricing Done Right, by Tim J. Smith and released in 2016, gave executives a roadmap for building the organization for pricing excellence. Part of this roadmap clearly defined the Value-Based Pricing Framework highlighting five distinct decision areas which pricing should inform. These are Business Strategy, Pricing Strategy, Market Pricing, Price Variance Policy (aka, Commercial Policy), and Price Execution.
Yet the framework did not go as far as to explore the specific skill sets and job placements an executive should define to fulfill its mission. Recently, Wendy Johnson, VP of Pricing at PagerDuty drove this discussion forward with her insights on talent management in the Professional Pricing Society’s Fall 2021 Virtual Conference.
Ms. Johnson identified four distinct areas that companies should hire to fill. These can be described as Pricing Strategy, Price Setting, Pricing Operations, and Deal Pricing.
The Pricing Strategy role should define the vision for the pricing function. This includes the capability requirements pricing will fulfill and the team and tools that will fulfill those capabilities. It also includes the communication pricing will have with the rest of the company’s organization. Consider this the leader that undergirds all pricing analysis across the overall Value-Based Pricing Framework.
The Price Setting role, which she describes simply as pricing, includes three decision areas. First is the price structure itself, often referred to as the business model or pricing framework within a company. Price structure decisions refer to the use of unit pricing, two-part tariffs, tying arrangements, good-better-best visioning, bundling, subscriptions, revenue management, pay-what-you-want, and other pricing structures. (See Pricing Strategy.) Second is the area of pricing itself, meaning setting the prices within the price structure to deliver specific offer pricing. Third, related strongly to the price structure itself, are price programs that define price segmentation strategies and price promotion strategies.
The Pricing Operations role engages strongly in data management. This includes publishing prices for price execution as well as directing market research or conducting price measurements, aka data analysis, to inform pricing decisions. It also includes the use of tools, such as simple Excel analysis to more complicated analysis using pricing specific algorithms or software.
The Deal Pricing role engages in pricing specific deals. Despite the call to automate the role of Deal Desks and move towards Configure Price Quote (CPQ) solutions, certain deals remain highly complicated at large companies. These deals may require input from several business units and financial management. Collecting and coordinating all of this information still requires a human. Thus, the Deal Desk is not dead yet.
Different Roles Require Different Strengths
Each of these roles is distinct and would benefit from a different type of person. The skill sets and aptitude required for defining the price structure, programs, and prices themselves generally require individuals that are strategic and inquisitive in orientation. In contrast, those for wrangling data, conducting statistical analysis and potentially implementing artificial intelligence generally requires individual that are more computer or data science oriented. And those for managing market research initiatives require individuals with deep knowledge in market research techniques and program management. When we get to the deal desk role, we then turn to thinking in terms of meticulous data collection and strong interpersonal skills for gathering information across the organization.
To search for a single person to fulfill all of these roles would be to search for a pricing unicorn. They exist, but they are few and far between and will require a hefty pay package. And, even if they are found and hired, they will still suffer from bandwidth challenges thus the organization would not achieve the full potential. Instead, organizations have moved towards hiring teams as pricing has become a more standard function.
Other managers have defined a similar approach to talent management within the Value-Based Pricing Framework. John Kutcher, currently Global Price Setting Leader at GE Healthcare and was the Enterprise Pricing Leader at Fiserv, once referred to dividing the pricing team between price setters and price getters. The price setters fulfill the price setting role. Price getters would manage the pricing operations role.
As pricing becomes more of a verb at companies rather than simply a number, meaning a decision area requiring management and information rather than a number used to close a deal, talent management and development will become a higher priority. Wendy Johnson provided a great template for getting started: role definition for talent acquisition.
Note: Wendy Johnson was a participant in a 10-week workshop of Wiglaf Pricing held in 2013 when she worked at CA Technologies. It was great to see her career progress. Well done, WENDY!