Driving Pricing Power Through Innovation

Hello and thank you all for tuning into another episode of Professional Pricing Society Podcast. My name is Terrence and we have another duo we're going to be speaking with and that is Adnan Akbar and Derek Neal, both withholding advisors and both expected to be at our fall pricing conference in Atlanta this October. They're going to be speaking with us about driving pricing

power through innovation. With nearly 20 years of experience and consultative and in house roles across energy management, technology and insurance and leading growth initiatives within Fortune 500 companies, Adnon specializes in helping firms commercialize software based offerings.

And with over 10 years of operational and consulting experience within the enterprise software, private equity and financial services industry, Derek manages pricing projects for cross industry clients working with teams to improve profitability in the market position. Gentlemen, how are we doing today? Doing great, happy to be here. Excellent. Hello, Karen. Hey, guys. Thanks so much for being here with us. It's going to be a great conversation.

You guys do have a workshop in Atlanta during this, our fall conference called Driving pricing Power through innovation. And so I want to go ahead and just jump right into the conversation and I want to ask you as the first question, can you help us unpack the topic for us? You know, why did you choose this topic of driving pricing power through innovation?

Yeah, I can maybe give a sense of it and you know Derek feel free to jump in. So we've been at a number of conferences and have have the opportunity to do, you know, a few different workshops and this one in particular I'm super excited about particularly because when we engage with clients, we have the opportunity to really get a sense of why is it that their customers buy from them. And what we often find is that they are providing, you know, massive amounts of value to their customers.

And spending a lot of time engaging with customers, gathering feedback from customers, internalizing that feedback and thinking through, OK, what can we do next that is going to make that is going to make sense for a broad set of customers, but is also an attractive option for us.

Point being, they're trying to walk away and figure out where to invest to come up with the next best thing, which in many ways is the essence of innovation, in order for that innovation to work in order for it to be commercialized. And in order to scale across their customers that commercialization strategy of which pricing is such a big part

of is just so, so important. How are you going to take this to market once this product feature set enhancement is built up and how are you going to ensure that it has staying power? How are you going to ensure that it does in fact meet the needs of your actual customers?

So all of those things are aspects that we are super excited about taking the audience through at the PPS Conference in October. And one thing I'll add, add Adnan. So one of the common themes that we hear a lot when we talk to pricers is how they they they they sit at the center of the corporation. I think there was a keynote at PPS last spring that talked about pricing as being the center of the universe. So pricing is truly a cross functional function.

Pricing teams need to kind of stay locked at the hip with the sales team, business development team, marketing leadership, product development, technology, etc. So this is one of the things that I love about pricing and it's something that comes up all the time when I speak to pricers. And then this spring, Adnan, during the the Holden Advisors workshop at at PPS in Dallas, we really focused on the link between pricing and sales.

So that cross functional pricing sales link the need need for pricers to coordinate with sellers in their companies to identify, quantify, communicate value to customers. And then this year, I think one of the reasons that we picked this topic and one of the reasons the topic is interesting to me. Is that it? It gives us the opportunity to explore a different connection point that's that's important for pricers and that's the connection between pricing and product development or

engineering teams. So those in the organization that are responsible for innovation, developing new products, adding new features. So that's one thing I like about this topic is that it gives us the opportunity to kind of focus the other direction in the value chain on the relationship between pricing and product development. And how to have the pricing organization involved in product innovation early in the process, that's interesting, okay, cool.

So you're kind of taking it into a different direction this year or this conference compared to the spring conference. Now, you mentioned innovation and working with the engineering individuals. Do you mind elaborate on that? Either one of you welcome, feel free to elaborate. But what do you mean by innovation and pricing power? And if you don't mind defining that in correlation to your specific workshop. Absolutely happy to give a bit

more context on those two terms. We hear them all the time, but they might not always be so clearly defined. So we think of innovation in a few ways. So the the first type of innovation is product innovation. That's kind of the common way that folks think about it. Product innovation I think comes in in kind of two flavors you can innovate up. It's probably what most folks think about when they think of

innovation. Essentially it's just thinking of ways to add value and hopefully price to to a product or service that you provide added by adding features that the customers is willing to pay for. And then I think the second flavor of product innovation is innovating down. So actually thinking about ways to create a new lower value, maybe flanking product or service, stripping out some features to provide like an entry level option, those are benefits.

That's a way to innovate, to kind of help protect the profitability of your main product and give an option for more price sensitive customers, which we call price buyers. But then I think even beyond product innovation, one of the things we'll talk about during the workshop is like pricing innovation. And so that's the ability to innovate around your price model, your price metric, the value drivers that your pricing is based on.

And I think that's one of the. One of the pillars to gaining or maintaining pricing power is having a really dynamic forward-looking innovative pricing model. And then the third thing that we talk about in terms of innovation, it can be bucketed into a large bucket of organizational innovation. So how you change the way that people, processes and technology come together?

In your in your organization to approve, improve your pricing power so, so that's a broad topic during during the workshop we'll we'll focus kind of through the lens of the pricing function. How can you, as a pricer, empower the people in the organization to identify, quantify, and communicate value? Or or or what organizational mechanisms can you establish to ensure that the pricers remain aware of and aligned to the other functions in the organization? So that was a long answer on

innovation. I don't know, I'm not if you have anything to add. Otherwise, we can kind of talk about pricing power. Yeah, Yeah. I mean, I think when I think about innovation, the piece that I think initially comes to mind is. So let me go back up for a second and talk about our approach. And you know, at Holden Advisors, we often talk about value and the question is how much we take a regimented approach to determine. How much value you are delivering to customers.

So for example, right, we have, we'll go through a process with a number of different types of inputs to say, let's estimate this out and we've determined that you've provided $50,000 of annual value to your customers as a result of your product or or service. And you know that could be as a result of offering them the ability to increase their revenue cost savings, decreasing risk, whatever it may be. There's a quantification exercise when I think about

innovation. One way to think about that innovation and probably say the most common way which Derek alluded to is you take that $50,000 and now because of your innovation you find you you found a better way to do it. You found incremental innovation. Now that $50,000. Value on an annual basis it's $100,000 because you are providing more value, you know it's a logical and I think fair to be able to charge more for your product or service as a result of that.

The other scenario is that OK for that $50,000 it's fair for the the customer to keep a portion of that value and it's also fair for the company to keep a portion of that value. The question become and the question then becomes what portion is fair. What we we refer to that as the capture rate or the portion of that that the company would take in as a result of innovation. You can put some thought into what are some of the levers that I could pull to make that

capture rate fluctuate. Should that number be okay, It's fair for me to take 10% of that value. Should it be, well, it's fair for me to take 20% of that value. It's hard to say. A lot of different factors come into play, but we will talk about some innovative ways. To pull both of those levers meaning like how do you increase that total value, how do you quantify that, how do you measure that or how do you change the portion of the value that that you can take.

And I think that does actually touch on, you know there was a two-part question because I think you asked about what innovation and pricing power is and it's really tying those two together which is going to be the core of our workshop. Nice. Your workshop sounds like it's going to be jam packed with insights about innovation and pricing power. So this is really good. Now how does innovation and really monetizing that innovation help a company build and maintain pricing power?

You guys kind of alluded to it previously, but if you don't mind expounding on that as well. Sure. So, so pricing power is something we've been talking about at Holden Advisors a lot lately. I think simply we think of pricing power as as the ability to increase prices without. Decreasing demand for the

product. So if you think of companies like Apple or Ferrari or Lululemon, seems like those companies can charge anything they want for their products without decreasing, decreasing demand. So pricing power as a concept is, is is closely tied to price elasticity of demand for the product. But we don't need to get into the meth and those examples were all luxury products, but we we see pricing power in in all other types of of companies and industries as well.

So as long as the the product or service is highly differentiated, we we see, we see pricing powers from you know everything from commodities to to highly niche markets. We think of pricing power as as a 0 sum game. So some companies have it and some companies don't and if you have it, you want to maintain it and if you don't have it, you want to acquire it. And as Anan was alluding to, we think innovation is one of those, one of the one of the keys, if not the key to maintaining.

Maintaining pricing power, but it's really all about ensuring that the the right sort of innovation is, is happening within the organization to maintain pricing power. So in terms of product innovation, it's about providing the right set of products with the right features and the right value at the right price to kind of ensure price value alignment with your with your customers. So if you if you do that well,

it helps you either gain. Or maintain, if you have it already, price and power in the market. And when it comes to monetizing that innovation, one of the things that we see a lot with our clients, I can kind of give an example, It's the idea of the consumption gap. So this happens frequently with technology companies, so both

hardware and software. And it's the idea that new features are added to a product oftentimes faster than customers of that product are able to consume those features. Or let alone value those features or be willing to pay for them so often time. If you take for example a subscription based SaaS software offering, there's kind of an interesting psychological effect that will take place if you add features to a product that a customer isn't interested in or

won't use. Even if you don't increase the price, even if you don't increase the price, you actually decrease that value to price ratio for the product. Because customers see features in the product that they don't want and they say I don't want that, I don't need that, I don't wanna pay for that, lower my price and that actually can hurt the value of the product in the eyes of customers that are not using those new features. So that's the consumption gap.

We see that a lot. You know this proliferation of unnecessary product features, unnecessary complexity the engineering teams can can get overzealous. You know, they're focused on the technology they're they're nerding out on the technology, not necessarily always thinking about things from the perspective of the customer. And then they they develop and add features that the, the, the, the customer's not not ready, at least not ready yet.

To. So that whole idea that that's something that we'll we'll explore in the workshop, that's a common that we see that an an organization that can degrade an organization's pricing power. Okay, interesting. Okay, cool. Now look, many organizations and companies do already have robust innovation programs in place to help them grow and also to meet their evolving customer needs. But you have to ask yourself, you know what can really be improved now? You know, that's that's one of

the $1,000,000 questions. Since they're on innovation, what can be improved I. Think it's a great question. I've been part of, you know, small and large organizations, and what I've seen is that organizations of all sizes do put a lot of time, resources and emphasis on creating innovation, whether that's, you know, having a process where they can.

Farm ideas from their existing teams have competitions or even like separate out groups that are specifically dedicated to innovation so that they have that kind of future in mind for organizations. And I think that often works really well. The gap that we see I think is in many ways what Derek just alluded to with the concept of a consumption gap, because what it boils down to is that. Is this new product feature or service aligned with the customer needs at that specific time?

And then taking that one step further, is the organization set up to be able to monetize that in the right way? Meaning that Okay for example, we've come out with this new platform that can run artificial intelligence that can and can enhance dishes making. So we've got this product. And it's ready to go and based on our customer conversations, we've talked to them and we feel like this can add some significant value to our customers.

But we've got a sales force out there of 1000 different people with varying levels of skill in in different types of experience. Are they ready to be able to sell this? Are they ready to be able to communicate the value that this can offer their their customers? Do they know? Kind of. How to price this thing, how to negotiate and do they really kind of have they bought into that commercialization model?

That's one aspect of it. The other aspect is you know with innovation it can be quite complex and if you're looking at you know in the example that I gave about a platform based infrastructure that can help run AI, is the customers infrastructure ready for something like that? Is this going to impact them in the right way?

That's possible so. Point being that there's all of these different considerations that come into play and it's really in my experience it's about having that organizational tie in between product teams, between sales teams, between marketing teams, between pricing teams, the entire

commercialization team. So they're they're speaking the same language that can translate some of these high value features to something that is going to impact the customer and can be communicated in simple terms. Throughout the sales and purchasing process. So that's I think the the biggest gap is being able to connect the dots within organizations so they can take it to market in such a way that it's reflective of the value

they have. And it just to give you a couple examples of or maybe want a single single example. What we often see is, you know, an example I gave earlier where an organization generating $50,000 worth of value the the reason they are generating so much value is because there's years of innovation behind it. But what we're finding is that the prices they're charging are far, far below the value they

are delivering to customers. And I think the take away, one of the some of the takeaways that we walk away with is that they've done such a good job with innovation and they've differentiated from their customers and that they're delivering so much value, but their prices are not reflective

of that. So we've got some, you know, general analysis that we'll go through within the workshop to say okay, what are some quick things that you may want to look for to get a sense of, are you under monetized? Is there not it has there been innovation that you've not been fully taking advantage of? And then the other aspect is how

do you prioritize innovation. So I think a lot of those kind of tie in elements come into play and we'll go into a lot of depth in the course of our workshop that you know you paint, you guys both paint the picture of should you as a company even ready to innovate and if they are, you know how do they communicate that and and are they under monetizing, over monetizing is that at the even a thing when it comes to

innovation. So that's very interesting aspects regarding innovation from a pricing from professional pricers like you both. Now let me ask you this question as well. Are there signs that an organization is not realizing their full benefit? Love their innovation. Yeah, Yeah, absolutely. I mean and that's it's one of the things that we'll go into. So you know for example, I think one of the things that one of the quick things that we look for is to analyze the the

customer base. And if you go in and look at a customer base and say what customers are just they they absolutely love you guys, this is great. Nobody ever cancels. That's a good thing because you want to have customer stickiness. But that begs the question on are you monetizing things in the right way for companies that have, you know, thousands and thousands of customers? It's likely a bit odd that customers aren't looking for other alternatives or anything

like that. And a sign of having some customer turnover, not not too much, where it's negatively impacting your business? That can be a positive because not every organization is set up to fulfill the needs of all all customers. They're often operating in different segments and that's kind of the benefit of competition because its competitors do different things well. But if your customers are

sticking with you, then are. If every customer is always sticking with you, that is assigned to further explore to say you know what. What would be the impact if we were to better monetize some of the innovations that we've had today? Anything to add there, Derek? No, I just, I just reiterate it's all about understanding the voice of the customer, the nuances between the different customer use cases for a different product and I think in

many cases it falls on the. The pricing organization or the pricing team to be that bridge between sales and product development to ensure that you're monetizing innovations correctly or even in some cases directly between the customer and product development to ensure that innovative solutions are monetized effectively. Good, Okay, good. So there are signs and they need to be aware. That's good. Now you guys have really been speaking on this throughout the whole.

Discussion about what attendees will learn. But is there? I mean, I want to ask you guys individually, is there anything that you are most excited for attendees to learn during your workshop? Because they're going to learn a lot of things and this is going to be a very insightful workshop. Yeah. For me, I think the number one thing is like we want to take attendees through the process

from start to finish. And in the background what we are going to layer in is picking a part at the most granular level. An example of something that we have worked through where a company has asked us to help them best monetize their innovation. So we're going to take them through that process from start

to finish. What I'm personally most excited about is to be able to learn from the collective knowledge of attendees to say to get a sense of how is this occurring in your respective organizations and being able to get to a point where we say these are some commonalities that we are observing as a result of the knowledge. Because you know, I think our what what I'm most excited about is the opportunity to facilitate some of these conversations.

But I think the true learning happens from attendees engaging with each other and to say okay, this is a problem at this type of organization. Industries could be completely different, but they're all these commonalities and this is something that we have used to best approach that.

Whether that's, you know, shifting our customers from looking at one price metric to another so that we can capitalize on innovation, thinking about the different types of price models that can that best resonate with perhaps different customer segments or building out these processes from an innovation perspective that like I was saying earlier, connect the dots within the organization. So I'm definitely excited to be able to run through some of the

content that we have. But what excites me is a little bit more is to get the reactions from the room and just try to build on that. Collective knowledge is collective knowledge from the attendees. Yeah. And just ADD we're we're really focused on making this workshop practical. So one of the things that I'm most excited about for the workshop in Atlanta is this tool that we we plan to bring to the workshop to to kind of kind of make it real and make it practical for workshop attendees so.

It's a it's a pricing innovation tool, just a prebuilt Excel tool. We'll be using it in in various exercises throughout the workshop to help price pricers, one discover and document the value of innovation innovative products, and to calculate the the actually calculate the price for an innovative product of their own. So whether that's a new product, a brand new product, a repackaged product or just a incrementally innovative

solution. Workshop attendees will leave the workshop with a head start and a practical guide on on how to start thinking about pricing that solution within their within their organizations. So we're super excited to see everyone in Atlanta. It should be a should be a great time it. Is going to be a great time. Thanks so much guys for your time. Speaking with me today, Adnan Akbari and Derek Neil, Withholding Advisors. Before I let you guys go, I want to ask you guys one more question.

Where can listeners? Visit or go to to learn more about you guys individually, your company or what to just, you know, any kind of resource you have out there for listeners. Yeah, we'd love for attendees to check out our website holdenadvisors.com and you can get a more of a sense of our company, our approach, and learn a little bit more us about learn a little bit more about us. Okay, awesome. And also LinkedIn as well in case they want to connect individually.

That's all as a great resource as well. So thank you guys so much for your time. They are going to be at the conference October 10th through the 13th here in Atlanta, GA for our fall conference. Until next time you guys have a good one. Bye, bye.