Episode #0123 - Pricing Transformation Series Part 2: Why Your Pricing Isn’t Working — And It’s Not Just Because of Your Sales or Pricing Teams

Times-stamp Notes:

[00:00] Introduction to developing pricing strategies
[00:32] Developing pricing strategies amid rising complexity and cost pressures
[01:34] Challenges in developing pricing strategies within current systems
[03:57] Structural issues in developing pricing strategies
[05:48] Example of misalignment when developing pricing strategies
[08:47] Improving and developing pricing strategies through better design
[10:18] Conclusion: Key takeaways on developing pricing strategies

 

00:00 Been a big week in Australia and in the world. Pricing is back in the spotlight. And in the news we're reading that major retailers are under scrutiny again for how they're applying discounts. The ACCC are questioning retailers for price transparency. And at the same time, many businesses are dealing with rising input costs driven by fuel, supply chain pressure and global instability fundamentally created by the war we find ourselves in.

00:32 Now, what this highlights to me is something deeper. Pricing is becoming harder and more complex, not easier, unfortunately. And that's not just a consumer issue. I'm seeing this same thing across B2B and trade businesses: inconsistent pricing, heavy discounting, growing pressure to justify decisions. And yet more reliance on short-term fixes. Things like surcharges and minimum order thresholds and now the new trend, just to recover costs.

01:13 Unfortunately, though, many are dropping strategic pricing in favour of these short-term fixes because they feel this will recover margin quicker, better, faster, etc. Which really does beg the question: Is your pricing system actually working for you or against you?

01:34 Hello and welcome to Pricing College podcast. My name is Joanna Wells and I'm the founder and director of Taylor Wells Advisory. And we help businesses improve margin through better pricing strategy. Now, this episode is going to be part of a series on pricing transformation. And the reason being is because many Australian B2B and trade businesses right now are under pressure.

02:04 Pricing just isn't under control and it's at a turning point. We've got legacy models that are struggling to keep up with cost changes, commercial teams who are relying more and more on exceptions to get deals done. And leaders who are asking for more control, more margin and more consistency and often at the same time and teams that can't deliver that. And that creates a huge disconnect. The pricing system says one thing but the business and the team and the culture behaves quite differently. So this series is about unpacking that gap. Not just what's going wrong but what's actually needs to change to make this better for everyone.

02:53 And we'll start with a common assumption: Is pricing isn't working, it must be because of the sales team or the pricing team. The default response is usually: “Let's tighten up the rules and then we'll see things improve quickly.” More controls, more approvals, stricter compliance. But if your pricing only works when everyone behaves perfectly, is it really a strong model?

03:57 I see this all the time. A business will request and then roll out a new and improved pricing structure. It's got more refined segmentation, tighter discount bands to ensure margin recovery, clearer rules for the teams to follow. Everything's really well documented. And for a few months it looks really, really good. But then things start slowing down, momentum sort of dies out, bit underwhelming. Exceptions start to creep back in, sales teams start pushing the boundaries again and the system gets worked around yet again and you see increasing pricing records and configurations and complexity. New complexity starts to build upon old. Not because sales and pricing teams are trying to be difficult, no, not at all. It's because the model that they're working with doesn't actually reflect how the business actually sells and customers actually buy from you. This is the key shift. A lot of pricing problems are not merely execution issues. They're actually design structural issues.

04:45 Now, I just want to be clear about this: Sometimes, capability, team structure, organisational design and talent are a part of the issue. They are. And I'll look, I'll come back to that in the next episode. But in many cases, the bigger problem sits in the model itself.

05:09 At this point, it's usually the poor old sales team that gets the blame. "Oh, they're discounting too much, they don't follow process, they're going back to what they know, they're not following the rules. They're leaving margin on the table. They shouldn't have given away that deal at that price. They don't know how to sell on value." But take a look closer. Sales aren't ignoring pricing or the pricing system that you're trying to create, and you've spent a lot of money on. They're trying to make it work.

05:48 Let me give you an example. Okay, so there was this B2B business that I worked for. It was a B2B industrial business, and they were halfway through a business transformation, and they had already engaged with pricing consultants, but had a few questions and so brought me in just to get a third-party objective view about the work they had invested in with this consultancy. And fundamentally, they were concerned because they had their running trials on the new price structure, and they were finding that sales, they just weren't using it. And rather than just not using it, they they were the kept pushing for exceptions and complaining that they needed to do, you know, come up with better pricing themselves, that the system wasn't giving them what they needed. Obviously, you know, leadership backed the pricing model because they'd invested in it and, you know, the diagnostics and all the prototypes and blueprints that the consultants had shared with them seemed to fit with their objectives for wanting more EBITDA.

06:58 However, you know, they were perplexed: well, what's happening? Deals obviously still got done, but what we found was that they got done through workarounds and outside of the system. Fundamentally, after a month or so of reviewing everything, you know, logically, the price structure looked okay, but the model itself didn't match how customers were actually buying from this business.

07:26 And we see this quite a bit. When the business doesn't listen to the team, the sales team, the pricing team, the customers, exceptions increase, trust in the pricing system drops, and pricing becomes much harder to explain and control. When pricing doesn't reflect commercial reality, teams will find a way around it. And over time, inconsistency increases, margin becomes less predictable, and pricing becomes much harder to defend.

08:06 So why isn't your pricing working? Why is pricing so complex? Why is pricing so difficult? It's not because your sales team or your pricing team isn't capable or competent enough, or your sales team and pricing teams are out of control and doing their own thing. It's because your pricing structure was built for a way of selling that no longer exists. And trying to fix it by tightening rules just makes the gap more obvious and teams' lives so much more difficult.

08:47 Are you asking your team to follow a pricing model or to work around one? If pricing relies on constant exceptions, it's not a control issue. It's actually a design signal. You don't fix pricing by adding more rules. You fix it by making it usable, practical, realistic. That means simplifying structures, aligning to how deals actually happen and designing flexibility properly in your system. Not leaving it to exceptions or ignoring the problem.

09:30 This is where pricing transformation starts. It doesn't start with new systems or more complexity, but with a fundamental shift and focus on the core problem and how business actually operates. Designing a pricing model that reflects how the business actually operates and can be used consistently by the teams. Why? Because we want to make people's lives easier. We want to enable our customers to understand the value that we offer, to perceive value correctly. Where structure provides clarity, flexibility is intentional, and outcomes are really easy to explain.

10:18 So if your pricing team feels difficult, onerous, broken, complex... before you blame the sales team or point fingers at the pricing team, ask yourself this: Is our pricing model helping our sales team to sell or is it just getting in the way? Because in most cases, the problem isn't the sales or the pricing team, it's the model that they've been given to work with.

10:50 And in the next episode, I'm going to tackle the other side of this. Because sometimes it is the pricing team, or the sales team or how the functions have been set up. And that's really where pricing transformation gets real. Not in theory, not in systems, but in the choices we make about how pricing gets designed, accountability and ownership. Who owns and drives pricing? How do we support our teams to be the best that they can be? And how do businesses, we, how do we respond to what's actually happening in the market? Do we bury our heads in the sand? Do we react? Do we go gung-ho? Do we listen or do we blame? Because pricing isn't just a number, it's how your business shows up commercially every single day.

11:46 And right now, that's exactly what's under pressure. Thank you for listening. I'm Joanna Wells, I'm the founder and director of Taylor Wells Advisory. And we help businesses improve margin through better pricing strategy.