I’m reading David Lough’s book about Winston Churchill, Buy No More Champagne. I like Churchill – it’s pretty hard not to. He was far from perfect but was an inspirational military and political leader as well as a fascinating polymath – a painter, writer, public speaker, and general bon vivant.
Most people only know Churchill from the two military periods of his life – he served as an officer in the British Army in the late 1900s, before joining again and commanding a Battalion in the First World War (when he was nearly 40). Of course, he was Prime Minister during most of World War Two. Interestingly, He “settled” for the Cavalry at Sandhurst, because the entrance requirements were lower than the Infantry – in particular, in the area of mathematics. Curious, then, that during his political career during the two World Wars, Prime Minister Stanley Baldwin appointed him Chancellor of the Exchequer.
There are a number of hilarious stories about Churchill’s amazing overspending and his infrequent, and weakly executed attempts at cost-cutting. One of my favorites is when he suggests reducing wine merchant bills by only drinking champagne five nights a week.
What strikes me about Churchill, from reading Lough’s work is that Churchill took the view — that many pricers take — that expenses can only be reduced so far. Therefore, at some point, one has to work to increase one’s incoming funds; revenue in business terms or income in personal terms.
That’s what we do in pricing. We know that expenses are what they are, and that there are teams of people working on decreasing those where possible. However, what we can do is work on the other side of the equation – making sure that we are pricing the true value of the products and services we offer to our customers
Churchill did this. He knew that his experiences in the First World War (when he was First Lord of the Admiralty) put him in a strong bargaining position. When Churchill wrote his masterpiece on World War One — The World Crisis – he showed his deal skills when negotiating his advance and royalties’ knowing that both his reputation and direct experience in the war would hold great interest to readers. He also skillfully created additional demand, by expanding the number of volumes and the scope of the subject matter.
Best-in class companies work on both price and cost. For public companies, you can see this in their financial results. By the way, you can spot those who aren’t working on pricing (or, are working on it but not succeeding) where they gloss over the subject. Another easy “tell” for public companies is margin data on their 10ks. Are margins growing? How do margins compare to competitors? If growth focus is heavy on the top line, pricing discipline is probably lacking. Those who are best-in-class devote as much time and effort to getting money in the door, as they do to preventing money going out of the door. They know what their product and services are worth, what customers are willing to pay and the places where they have upside potential. They maintain discipline across their customer-facing functions (selecting the offerings and setting the price) and create solid metrics, appropriate goals, and accountability. All these can be found, in one form or another, in Churchill.
Churchill said that the four essentials of life were “hot baths, cold champagne, new peas and old brandy”. On this, as well as his perspectives about working on “price”, not cost, I’m with him all the way.
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