Dr. Liozu on the Role Pricing Plays in Driving Business Success

Valerie Howard interviews influencer and author Dr. Stephan Liozu on his book Pricing and Human Capital and the key role pricing plays in an organization’s success. Dr. Liozu shares his thoughts on pricing as a multifunctional discipline that requires cross-functional collaboration to succeed. He and Valerie discuss the importance of having a pricing champion who understands the technical, human, and emotional sides to pricing and how they can help lead a company in achieving a shared goal. Valerie highlights how Dr. Liozu’s research in Pricing and Human Capital can help companies develop and execute pricing teams and Dr. Liozu expands on what is needed to drive pricing leadership forward.

Highlights 

[0:14]: Valerie introduces Dr. Stephan Liozu, author of the book Pricing and Human Capital
[0:58]: Dr. Liozu discusses his professional background and his discovery of the emotional complexity around pricing 
[2:35]: Valerie asks Dr. Liozu to share his perspective on the unique skillsets of pricing professionals 
[3:01]: Dr. Liozu explains what it means to view pricing as a multifunctional discipline
[4:53]: Dr. Liozu talks about why the role of pricing is misunderstood 
[6:31]: Valerie asks for his Dr. Liozu’s thoughts on the growing influence pricing teams are now having on businesses
[7:01]: Dr. Liozu compares the influence of pricing teams now versus forty years ago and how more work still needs to be done
[8:34]: Valerie mentions the results of a study in “Pricing and Human Capital” where it was discovered that often times the final pricing decision doesn’t always sit with the pricing team
[9:32]: Dr. Liozu expounds upon that point and what pricing leadership looks like
[12:16]: Valerie asks what it looks like when an organization invests in pricing functions
[12:38]: Dr. Liozu stresses the importance of an involved leadership team
[13:55]: Valerie wraps up by asking about Dr. Liozu’s blog What Does it Take to be a Pricing Leader and the best practices around how to drive pricing leadership forward
[14:22]: Dr. Liozu reiterates the importance of understanding pricing as not just a technical but an emotional and human discipline as well

Full Transcript

Valerie Howard: Welcome to Coffee Chats with the PROS. My name is Valerie Howard and I'm the Solution Strategy Director at PROS and I'm so excited to be here with Dr. Stephan Liozu. Did I say that correctly?...

Dr. Stephan Liozu: Yeah.

Valerie Howard: Okay.

Dr. Stephan Liozu: No, you're doing great.

Valerie Howard: Thank you. Thank you, Stephan. Well, it's such a pleasure to meet with you today. As our audience is likely to know, Stephan you're a renowned leader amongst pricing circles, a practitioner, a researcher, a book author, you've presented multiple times on pricing and you've authored multiple books as well, including this one I have here on Pricing and Human Capital. Today I'm interested in speaking to you about the key role that pricing plays in business organizations and in their success. I really enjoyed reading these interviews within Pricing and Human Capital and I'm interested in your perspective on your pricing path and what drove you to be an influencer and leader in the pricing space yourself.

Dr. Stephan Liozu: Well, thank you. Well, it's interesting because I am not really a pricing expert. I fell into pricing in 1998 when I was working on an SAP deployment and I was a business deployment leader. And then when we started discussing pricing and no one wanted to touch pricing and say, well, I was young and innocent and now I say, "I'll take it and I'll drive the specific process." And then I was like, "Oh my God, this is so emotional. It's complicated. And so many people don't want to do it. What's going on?" And then I got very interested. And then as I moved into my career, not a pricing career, a sales and marketing and business management, general management, all the way to a CEO role, I always paid attention to pricing because of that first experience.

Dr. Stephan LiozuAnd then try to understand how do we do this better? And then I realized as well that there is the technical side of pricing rather than the human and emotional side of pricing, which was something that was totally neglected. I mean, pricing in general is neglected in academia and in publications, but even the soft side of pricing, the leadership side of pricing was totally silent. So I said, "Hey, I'm going to do a PhD on it. And I'm going to publish a bunch of stuff." Which I did. And then all these books are really trying to fill the gaps for people to learn about it. And it's based on research and it's really... So in essence, I know a lot more about pricing because I did that research and I applied it in many companies, but I'm not a technical pricing expert.

Valerie Howard: Mm-hmm (affirmative). Yeah, I think in many cases we've oversimplified perhaps pricing to that supply/demand chart, but in reality, the application of pricing is so interesting and unique. I'd love to hear some of your perspective on the unique skillsets or the unique role that pricing plays. I think you touched on it a little bit, but could you add a little bit about the skill sets that you see?

Dr. Stephan Liozu: Yes, so what's unique about pricing and I studied that to a certain extent, is the fact that it's probably the most multifunctional discipline in business. I often compare it to supply chain, when supply chain touches a production quality, forecasting, inventory and transportation, the pricing also touches everything. And there's not one area that is not touched by pricing, when you think about it. So in essence, when you transfer that into the leadership skills you need to be good at managing teams that are not under your control. You need to then focus on cross functional collaboration. And then as a result, you need to make sure people have common goals and common systems and common objectives. And so it's natural and then it's difficult, so you need someone to champion it and as you can see in many companies, pricing is very fragmented.

Dr. Stephan Liozu: Some cost accountants are doing this, then sales are doing that. And who's orchestrating all that stuff, who's kind of ritualizing efforts and making sure everybody works in the same direction? It was fascinating to me when I read this. So my PhD is in management and I look at all the management theory and paid it a lot of attention to organizational science and leadership theories. And I'm like, "Oh my God, everything applies to pricing." But yet, no one has actually researched it and linked it to pricing. So I was... That's what I got in, you know?

Valerie Howard: Mm-hmm (affirmative). And that leads me to my next question is that in many organizations, pricing is housed in all kinds of different departments, sometimes in marketing, sometimes in finance, sometimes in sales and rarely does it report directly into the executive function. So I'm curious about your perspective on why doesn't pricing have a natural home and how does an organization determine the best fit for it?

Dr. Stephan Liozu: Well, so I would say generally speaking, the perception in organization is pricing is more tactical than strategic. So as such, we don't manage it as a strategic function. So it's not really... People don't pay attention to it, HR leaders and top executive, the C-suite. So we ended up doing pricing because maybe in one division we realized we need someone to manage this, and then on another division they need financial pricing. And then before you know it, you may have 40, 50 people touching pricing in many, many different places. But then again, it goes back to who is actually managing, holistically, the function from visioning to strategy, to tactics, and then to systems. And so as a result, it becomes very fragmented, right? And one of the fundamental issues we have is, it's a role that is not understood.

Dr. Stephan Liozu: So you ask an HR leader, "What's a pricing manager?" And they'll come back with an accountant job description. Or an IT job description, so it's really a battle. And I've gone through this in many companies that I work for when I'm hiring people, I have to create my own job descriptions. And sometimes I’m my own job family for pricing. So it's kind of a tricky situation because a lot of companies do pricing, they do have pricing people. But the function is just not proactively managed, and that's a shame because then these people are buried in deep in organizations and no one knows about them and they're mostly doing tactical work.

Valerie Howard: Yeah, absolutely. And that can be frustrating, right? Because I think if you're selling anything, you're pricing, but we know pricing is such a powerful lever and if you're not doing it strategically, likely losing revenue, margin, with that lack of oversight. So in your perspective then, related to this, how much influence are you seeing pricing teams having? Is the influence that they are having, is it growing across different companies that you work with?

Dr. Stephan Liozu: Well, yeah. I mean, it's growing, I mean, back to 40 years ago, I mean, pricing was nowhere to be seen, maybe some pioneers. Today, my research shows that you have a 22% of global Fortune 500 with decent pricing teams, over 65% of these companies are pricing titles. So the penetration of pricing has gone better, right? But we have a long way to go. We aren't growing and evolving as fast as analytics and supply chain and sales enablement, where, look at the penetration of customer success as a function. These functions are booming and we're not there yet. And again, it goes back to, does the c-suite have an understanding of why they need pricing? I mean, for you and I, it seemed to be very obvious. When you print an invoice, you need someone to put a price somewhere and define that price.

Dr. Stephan Liozu: And most of the time when I asked the leader, say, "Do you know who set that price? Who made that pricing decision for that specific product on the invoice?" "I don't know." And so I know someone is making a decision. So for me, it's fascinating that they will not understand that, but we're making progress, it's slow. I think we need to definitely engage the c-suite a lot more. But when I wrote that book and with lots of examples for the HR community, because these people are very essential to be able to define teams and define career path and define your good job description and we need them on board.

Valerie Howard: Absolutely. I'm showing the book again because I'm going to reference another study that I read about in this book. And to that point you just mentioned that often the execution of pricing, sometimes doesn't always even just sit with pricing. I think one of the surveys you did in here showed that often times some of the final decision on pricing was sitting with sales in cases. And that can be extremely frustrating from a pricing perspective when they're trying to push their strategy out. One of the other things that I thought was really interesting about this book was how highly satisfied a lot of pricing professionals were in their careers, but at the same time, many of them actually didn't expect their next role to be in pricing. And I'm curious about is that because there's not a lot of growth opportunities in pricing, or are there other perspectives that you have on that?

Dr. Stephan Liozu: Well, so yes, both. So I think a lot of people working in business, I may be wrong, but a lot of professionals, they want to be the GM, they want to be the CEO, right? This is what we're working on to go up the corporate ladder. And often they see these process functional area where they don't want to stay too long. They want to be in operations. They want to stay in the business. But they know we need to acquire the skills. So they go in sales and then they go in marketing and they do a stint in pricing, and then maybe in finance, but eventually the vast majority of people, they want to be their own bosses, or they want to have a GM role. I remember when I was young, that was it.

Dr. Stephan Liozu: That was my goal. I want it to be a general manager and so, in essence, other result, they understand that they need the skills of pricing because it's very important and we're glad that they do, but they're transient. They'll stay two, three, four, five years, and then they'll move on to something better, which is typically a product line manager, a product category manager, or a business manager, because they have the skills now. So I'm not surprised. And the other point is what you mentioned. If you look at what's published and in pricing, in my research, only 25% of companies that do pricing, may very well have a VP role. So that means it's either a manager or a director. And usually there is one, so it's not like there are huge opportunity to climb the ladder. And once you're in that track for pricing, you're in that track for pricing and it's difficult to get out of it.

Valerie Howard: Well, what I also saw in the research was that people felt as though, even if they'd come from outside of pricing roles, that being in a pricing role was actually giving them so much experience and wealth of knowledge to help them in their next role, no matter what that might be.

Dr. Stephan Liozu: Yeah. And that's a misconception, back to the definition. I think I've said that for the last five years of pricing, the title pricing doesn't do justice to what pricers do. And frankly, this is why today, we call them Head of Value-based Marketing. We call them Value Realization People, and if you could have a blend... So I just did a job description for a role, director of bid and value management. It's pricing role, but then it's more attractive for people because frankly, if you're going to do much more than pricing, they're going to do segmentation, they're going to do a positioning analysis and differentiation, and then pricing. But the title doesn't do justice to what you have to do and so feel free to use other job description and title because then you attract people and you keep them.

Valerie Howard: Mm-hmm (affirmative). Yeah. It's definitely an art and a science that requires a leadership skillset. So then my final question for you on this topic of pricing leadership and pricing roles is, what is it that's different about organizations that are investing in pricing functions from those that are kind of overlooking its importance? What are they getting right at the ones where they're investing?

Dr. Stephan Liozu: Well, I definitely think it starts at the top. And if you blessed at the top to have a leader that comes from marketing or finance and has done pricing before, or been exposed to pricing, you're going to see a lot more interest in it. And then you're going to see a lot more investment in leadership first, because I'm convinced that the c-suite is ready to invest in pricing in an organization when they see they have people with good potential. And if it's think their teams is not able to do a large scale enterprise pricing software deployment or transformation, because they don't have the skills, I think it will be too complicated for them to think, "Well, I'm going to... Let's go develop 10 leaders to do this."

Dr. Stephan Liozu: So I do believe that confidence in the leadership of the team to do it is essential. And it's not just the pricing leadership. You have to have commercial leadership and marketing leadership, because again, it's a multifunctional team effort. So when they understand that I think it's much easier to focus on investments and priorities because they know it's going to get executed. See what I mean? So it's not just a matter, "I'm going to buy a software." Or "I'm going to invest in a new methodology." And then it's going to take 10 years to get it done. They know that the team can do it.

Valerie Howard: So I'm hearing a call to action to pricing leaders, to not just lay out the plan, but to, I guess, influence your leadership's confidence in you to execute on that plan.

Dr. Stephan Liozu: Yeah.

Valerie Howard: Wonderful. And I know Stephan, you just supported us in writing a blog on just this topic on how to drive pricing leadership forward on the PROS blog. Can you tell us a little bit about what the audience can find in that blog?

Dr. Stephan Liozu: Yeah, well, so I talked to all these leaders that you saw in the book, and these guys are amazing professionals, VPs of pricing for the most part. And they've all done a stint in sales and they've invested in themselves and they have a growth mindset. It's fascinating to see that VP of pricing of that caliber of a company like Medtronic or – these companies are huge powerhouses with lots of people in pricing, and they are very charismatic and inspiring leaders. So we need more of those because again, once you're on the radar, your CEO knows that they can count on you to do it. And it's phenomenal as far as how much investment you can receive because they trust that you're going to design the best team. You're going to invest in capabilities. You got to have the right system and then you're going to get it done.

Dr. Stephan Liozu: So I was talking to a VP of pricing that has a phenomenal track record in getting things done as an executer. And the CEO is like, "Yeah, I know this guy's going to get it done." So this is what I'm talking about in the blog about, it's not just the technical side, it's also the emotional and human side that we need to manage, and actually you could say even much better on the pricing side.

Valerie Howard: Well, fantastic. Thank you so much, Stephan, it's been a pleasure to talk to you about the role of pricing within organizations and how important it is to a business's success. So for our audience, if you'd like to learn more about what it takes to be a successful pricing leader, you can check out Stephan's blog on pros.com and I'm really looking forward to our next discussion Stephan, on that value mindset that you talked about. That is so key to pricing leadership.

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