2011 PRICING REALIZATION SURVEY

Author: Stephan M. Liozu

Our research project reveals some important facts about pricing management with account management professionals:

- Pricing capabilities are critical to prepare account management professionals for pricing and value management situations and discussions. This finding is consistent with recent research studies in the field of marketing and pricing capabilities. Firms that develop unique and inimitable pricing capabilities with their account management team will generate superior performance in the market place. Account management leaders therefore might need to focus on the design and development of these capabilities with their teams in the areas of price setting and price realization. It is interesting to note that our respondents reported receiving very little pricing training. Yet they seemed to demonstrate a certain level of pricing knowledge, potentially driven by pricing experience.

- Account management professionals agree that preparation prior to negotiation is critical to avoid unnecessary discounting during negotiation. Understanding the product/service in place helps in the preparation of the value discussion. This concept of preparation is also tightly related to the capabilities construct. Account managers who excel in the area of negotiation preparation feel more confident in their customer interactions. The level of price realization might increase under these circumstances as performance increases. Preparation before negotiation thus becomes a critical step to increase value capture through proper price behavior.

- Account management professionals demonstrate a superior level of confidence driven by their beliefs in the vision and products/services of their firms. This level of confidence allows them to take on any challenges including tough price discussions with customers. - Account management professional face intense pricing competition in the market place. While they seem to be able to predict changing competitive dynamics and market forces, they face strong competition daily. That might also explain why most respondents declared that their compensation is based on increased sales volume and their ability to sell to large accounts. Faced with intense competition, firms might feel it necessary to protect volume and market share. Our findings suggest that firms that design purposeful strategies and programs to boost organizational confidence in their sales and account management teams can achieve significantly greater firm performance. The unique combination of the organizational elements related to pricing explored in our research (capabilities, delegation of pricing authority, incentive and goal systems, and preparation prior to negotiation) might engender the right level of comfort and confidence in sales and account management with the pricing function and pricing activities. Previous research on pricing has suggested that it is a very complex function (Dolan and Simon 1996), one subject to internal conflicts and tensions (Lancioni, Schau et al. 2005). Establishing a confident climate for sales and account management to deal with this complexity might lead to greater performance outcomes. Therefore, we conjecture that the development and the deployment of unique intellectual capital in pricing (Dutta, Bergen et al. 2002), also characterized as “brain ware” (Liebowitz 2000:p1), throughout the organization creates superior pricing intelligence that leads to superior firm performance.

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