Episode #0110 - What is a (CRO) chief revenue officer and what should they know about pricing ?

#PricingPodcast #PricingCollege #ChiefRevenueOfficer

In today's episode, we want to talk about probably a new addition to the C suite, which is called CRO which stands for Chief Revenue Officer. And this is probably a role that we're seeing more in SaaS companies, software as a service, more startups, more tech, probably more in America, I suppose. And it's someone whose focus is on all the revenue in the business, customers, profitability, revenue, selling, marketing, sales. It's a real catch all term. And I suppose we want to discuss today, is it really just a rebranding of an old fashioned pricing strategy director?

 

Yeah, well, I suppose you could argue it is, but then you'd have to say that the pricing manager role is set up properly. And often the problem with the pricing manager role and executive role is that it isn't set up correctly. And often it just looks at one or two tasks like price setting or price administration or pricing systems in a business. It doesn't look at pricing holistically. And to many degrees, I think this new Chief Revenue Officer role can learn a lot from the mistakes of the evolving pricing function and ensure that it doesn't fall into the same traps, because I do foresee that happening. But looking at the role in itself, it is a huge role. It looks after sales, which is a specialisation in itself. It looks after marketing. And if it is an SaaS business, there's huge amounts of work to do in marketing. You've got the website build, you've got the technical side of it, you've got the content creation, you've got the alignment with marketing to product. And also they oversee products, they oversee product innovation. They have to match product to market. They have to understand their customers.

They've got to utilise huge amounts of data to price, to develop products to market correctly. And these are just some of the aspects of revenue generation, as you can see. As I explain it, it's a huge remit. And yet I know in prior podcasts that we often argue that pricing has to consider all of these things to be able to price. However, there are some drawbacks. You've got such a huge remit if you can really oversee all of that. Are you doing it properly? And I think from what I've seen, based on a lot of the SaaS pricing, I think it exposes the business to risk principally because it spreads itself too thin. And I think a lot more, I think effort and resources have to be put into pricing. When you've got such a big remit, can you possibly do that all yourself? So I believe maybe that the remit is okay if it oversees big teams and specialist talent to do specific areas of the job well. However, I still think that the role is way too big and often doesn't change because often people in those sort of businesses startups still have that start up mentality and as they grow, don't change and morph the role. So I think there's some organisational design issues at the heart of this that need to be addressed now to make this role even better.

 

I'm actually surprised by Joanna's view there, being honest. I think it's a great thing. I think it's what we've been arguing for in this podcast since day one. Often when we look at companies and we look at people trying to recruit a pricing manager or a pricing analyst or implement a pricing function, and then you go, who will this person report to? And it gets lost and falls between the cracks and it becomes reporting to sales, reporting to marketing. Fundamentally, I think this is great because it basically means you're bringing commerciality,it chief commercial officer is another way you could describe it. And you're bringing them up to the top table where they get to say we often complain that businesses are run by finance, they're run by operations or marketing, and sales don't work together. And that often happens because there isn't a head honcho to push them together. That's why I think this is a really good step. Clearly, I depends on the size of the company. Even a small company, one person can't do all this, but with the team, they need to be flowing in the same direction and there needs to be someone at the top.

 

So I think it's a good thing overly backed up by the right teams and the right expertise. Clearly once a company gets a bit bigger, once it gets multiple revenue streams, once it becomes you're operating in different markets, clearly this becomes harder. But again I think that makes it even more reason to have this senior leader, whatever you want to call him, a CRO, chief commercial officer, pricing director, strategy director, blue-sky thinker whatever it is, I think it's a great thing. I think as long as they're being backed up by the expertise, obviously under those categories, clearly if this person is running sales, marketing, value pricing, clearly they want experts in all those areas under them. Imagine this is a company big enough to afford these roles. So this is the upper, the C suite and then you'll have to probably directors beneath. Clearly those are a lot of salaries but obviously marketing and sales are different functions, pricing is a different function and as long as they're backed up by those people but they're all flowing in the same direction, they're reporting to the same person on the board, I think it's a really good thing and I see a lot of potential for it. 

 

I'm going to argue a lot of companies aren't going to implement this purely because they don't think in this way. And again it's no surprise that it's coming from Silicon Valley, it's coming from those sort of startups where they're focused on revenue and venture capital funding backing them. So I'd love to see more of it, I'd love to see it heading into B2B industries and yeah, I think it's great.

 

Well I think you've misunderstood me though. I see it as a great opportunity and for all of those reasons, as I said, I think principally there could be issues with the role, if the organisational design and the role structure isn't aligned to a very quick and evolving business model and a changing market, you simply just can't have one person doing all of that work. It's an oversight, you should have one person overseeing it, hence it's an executive level recruit here. Obviously they're overseeing it. So the manpower, the choice of team mix and skills is vital to ensure that you're overseeing all that revenue safely. My point was that often things like organisational design, team structure, role design have not been considered well in pricing functions and I fear that could happen in SaaS businesses as well. And the reason I think that is a possibility is I think with the nature of the business, I think the startup mentality stays with a lot of sets businesses and the emphasis is always on customer acquisition, finding those new customers, finding that revenue, and often through that pure focus on just getting more customers, you forget what the real value of the business is.

 

It's almost a reactive type of mindset and then you don't put those strategic things in place and over time you start to expect one person to oversee and do all of those different things from marketing, sales, product, and not give them the recognition for it, and then end up blaming them when things go wrong. And really it's been set up incorrectly. I say this from experience. I see it happening. I see it happening everywhere in pricing. It happens all over the place. And I have so many pricing managers and executives saying, I want this to change its business model issue. They're not understanding the role of pricing and the business. So here I just want to say, if you're in a SaaS business, don't fall into the same traps. One of those things, if you think, how will I know if I'm in that sort of lap trap? Well, if you're thinking about that customer acquisition and you're not really thinking, and you've acquired lots of customers, and you're not thinking about customer lifetime value, that's an indication potentially that you're setting your revenue officer up for failure. Because really, it's not just about making money in the instance now, right now, what do you do when you've got all these customers that love what you're doing but potentially don't love the pricing or don't like the product anymore? How are you going to pivot and how you're going to respond to that? Because you want to lose all those customers. You spent a long time generating all the marketing, setting up your business, et cetera, et cetera, and then just lose them by not pricing correctly, by not marketing correctly, but not treating them correctly. So what I'm doing is, don't spread yourself too thin as my point here, and make sure you don't overlook things like planning, organisational design, thinking about your new value metrics and pricing metrics carefully, and potentially really thinking about how you're going to change your pricing and revenue model or potentially have you even thought that you may need to do it? Is a adhoc price rise strategy really enough to generate profitability? Maybe it is now but it may just churn through a whole lot of customers tomorrow. And these are the sort of strategic things I would like a Chief Revenue Officer to consider as they're starting a new job in a SaaS company because those things will come around and bite you if they're not addressed. And if you see in the business and culture that there's a lack of recognition and awareness of the customer, of the product market, fit and all of that sort of stuff, customer lifetime value is just a buzzword and not really part of the pricing culture, then you probably got to be aware that this role may not be set up correctly.

I think it's a good thing. I clearly think it's a very tough job in some way. You're actually cannibalising other people's jobs. Like if the Chief Revenue Officer is doing all this, what's the CEO doing is the CEO just speaking to investors, what are they really doing? Because in theory if we're looking at there's so much of that remit in the business, what the business does, it's pretty much the entire commercial focus. So I completely recognise it's a very tough job. Nobody can be hands on and know every detail. Like very few people are marketing experts, sales experts, pricing experts, customer onboarding experts, customer experience experts, especially when the company gets even small sized it'd be very difficult. But I still think it's a great step. I think it will help people align things going the right direction I would say. I think it is the right step. I think it's going to still know it will never get over. The other issues with, are we sort of saying that then finance and all other aspects are not working in the same sheet or are we just making one big silo and then the other silos are separate.

So our operations and finance sort of separate to this and we'll even become more siloed if we do that. Clearly for the business to really work well, everything needs to be working together. I assume that the CEO needs to be driving everything. At the end of the day, the CEO needs to be the person who you know and again when you get into a very big company it becomes very difficult. But at least they have to have a real understanding in at least broad terms on every area of the business and they need to prioritise and they need to make sure that the entire business is operating with a commercial focus, with a business with a value focus. And realistically, the CEO should be the chief revenue officer or at least have that, wear that hat at least most of the time as well. But I think it's getting one step closer. It's ensuring that someone who has pricing knowledge is at least getting a say on the top table. And I think that's one of the biggest problems that we often see when you see a pricing team set up to feel it's one reporting into this department or into finance or into something else.

It's when marketing and sales are running off doing their own thing without discussing stuff together. And it's when no one really seems to know what the company is actually doing. So I personally think it's a good thing. I would love to see more of it. Obviously it's going to be interesting. Clearly whoever takes these sort of jobs is signing up for an awful lot of work. So we wish them well. But yeah, I think pricing is certainly a string to their bow that they should have. And we'd love to have more discussions about this in the future. I'm sure we'll cover this in future podcasts.

I think it would be a great role, but it has to be set up properly. And you mention the point about the CEO. Is it sort of taking on the CEO kind of the same thing? I don't think so. I think it's an oversight role. It works like pricing across multiple functions. I suppose the chief revenue officer actually recognises that in a sense the pricing manager role still is going no, pricing people are just responsible for pricing and thereby siloing pricing people to just that when really surprised properly. You need to think about sales, marketing, products, customer service, the whole lot. But really revenue officer role doesn't take on anyone else's job and really it's an oversight role. It's actually not responsible for revenue generation. And this is why I feel it's another reason why it's set up incorrectly. There needs to be almost like this centralised mini structure of all people coming together. You've got your marketing director, you've got your sales director, you've got your CEO who oversees all of that, and you've got your revenue officer very much like the pricing officer sitting into the pricing committee. Just because the pricing manager and the revenue officer may be managed and have the expertise in pricing doesn't mean they own it.

 

This is very much a multidisciplinary decision. Making a pricing decision isn't just for the revenue officer. And sometimes when you haven't set up the role well, people assume that's what it is. And it's not like that. This is mine, this is your remit. It's very much a collaborative effort. But because of that, this is why organisational design and structure of the teams and how different teams work with each other are very important to actually generating profitable and sustainable revenue growth in a business. And that's the point I'm getting at here. So make sure you spend a lot of time thinking about the role in context to your offers, your plans, your business model, where you want to take your business strategy, your team structure. Now, the evolution of that team structure, your customer base, your segmentation, your price structure, your architecture, your marketing plan, how it feeds into that pricing strategy. These are key considerations into how you're going to set up and design a role and how you're going to set up a great role for success. Yeah, so I suppose that's my final thoughts on that.

Yeah, my final thoughts is really when I first heard about startups in Silicon Valley, the only job I wanted was one where you get to wear casual clothes, play a fuzz ball all day and get catered food. And this rule does not sound like that, so it's not for me. OK, we'll leave it there today. Have a great weekend. Bye.