The Ins and Outs of Value-Based Pricing for a Multinational Company

Luckily, this concept isn’t a new one. Some organizations have been using value-based pricing models for over a decade, and are willing to share their experience. 

Ingo Hennecke has worked extensively with value-based pricing as the Customer Value Excellence Lead at Bayer Crop Science. He shared his team’s challenges, pitfalls, and success stories over the past ten years to help other companies start their journey. 

Challenges of Value-Based Pricing 

Over the years, Hennecke has witnessed several teams begin the process of pricing reform. Across the board in every niche, there were consistent hurdles that needed to be dealt with. He outlined these issues, and how your team can prepare for them in advance. 

Challenge One: Getting Buy-In

As a pricing professional, you understand the effect that value-based pricing could have on your company. However, you are seldom the person pulling the strings. To make lasting change, you need to get and keep the attention of your C-Suite. 

You’re competing with other departments for 

• Budget
• Experts
• The time during board meetings
• Access to data 

When put against supply chain management, CRMs, and more, it can be difficult to keep momentum behind your pricing revolution. 

Hennecke found that presenting specific data points helped keep eyes on him and his team. He simply needed to show 

• Pricing has a higher impact than other functions – The most consistent way to get attention is by showing the impact on revenue that a few simple changes to pricing can make
• The messiness of their current commercial policy – Compare the turnover with the level of given discounts. By highlighting outliers you can explain the lost revenue and risk of losing customers over inconsistent pricing 
• How challenging it is to understand a break-even calculation – If you ask your audience to do some of the calculations that pricing teams do every day, you’re likely to get a spread of answers that highlight the effort it takes to get these processes right 

These will cement in your leaders’ minds the importance of pricing. 

Challenge Two: Understand and Quantify Customer Value 

The core function of value-based pricing is understanding the value your company offers to customers. This allows you to charge exactly what they’re willing to pay. However, discovering that perfect number is difficult. 

You will likely be facing, among other things: 

• Different customer segments  – Ideally you’ll be able to make large customer segments, but some niches require you to get as insular as single clients
• Cultural differences – A product that is vital in Brazil may have little-to-no effect in Thailand, so you must adjust for different geographical sectors
• Insufficient data – The information you’re getting from trials might be incomplete or difficult to understand
• Customers unwilling to share data – With an increased focus on data privacy, some clients may refuse to tell you how much they saved with your product

Breaking past these barriers takes a bit of creativity, as you’re working with your customers to collect both qualitative and quantitative data. 

Bayer started with a catalogue of different value drivers that they may provide. Rather than making this catalogue an opt-in scenario, customers needed to deselect what wasn’t relevant. This started a dialogue around why something wasn’t important to specific clients, resulting in more complete and accurate data. 

Another strategy involved telling interesting stories about customer value. For example, some of the plantations that Bayer sold to were having problems getting skilled workers. The sales team was able to show the value of their product by tying it back to this specific issue. 

Weeds on your plantation attract mice, and mice attract snakes. Workers don’t want the risk of being bitten by snakes in the field. When a client uses Bayer’s products to reduce weeds, they reduce the risk of snake bites and bring in better labourers. Having this story to share allowed the team to get past any bottlenecks customers had around the value of the product. 

Finally, to make this data as simple to share as possible, Hennecke’s team developed tools to share with their customers that could calculate the value with ease. This took the work out of answering questions and made people far more likely to share their data. 

Challenge Three: Getting Your Methodologies to Stick 

Getting buy-in from your team and customers is the final hurdle for value-based pricing. There are a few popular excuses you’re likely to hear.

• That won’t work here 

When you’re dealing with a multinational organisation, you might get pushback when introducing value-based pricing to a new geographical area. You’re likely to hear something along the lines of “Maybe that worked in Argentina, but things are different in Greece.” 

• We have other priorities 

Pricing excellence is only one thing that your organisation is concerned with. If your changes align with another department’s efforts, then it likely won’t be top-of-mind for all stakeholders. This is particularly true if you’re working with animosity between sales and marketing teams. 

• This is too complicated 

Some team members might feel intimidated by the concept of value-based pricing and think it’s too complicated to implement. They may also worry about a steep learning curve or the need for extensive data analysis. 

Handling these objectives takes a combination of positive reinforcement and strict monitoring. You can empower your team members with 

• Success stories and incentives 
• Clear paths to smaller workload and more money made 
• Leadership support 
• Global guidelines 
• Corporate Autidts 
• Yearly objectives 

You can also make training more engaging and effective by having fun, creating cross-functional teams, and getting leadership involved. 

Best Practices for Value-Based Pricing Implementation 

Hennecke shared a few of the top enablers that made his team’s pricing journey possible. Following these tips will prepare you for the journey to value-based pricing. 

Tip One: Use Success Stories 

Typically, pricing teams are fighting an uphill battle to be seen as successful. Any positive outcomes will be attributed to a strong field team, while failures are pinned on the tools or methodology. 

This can be combatted by celebrating successes with your process and showing the progress you’ve made. This can be through winning awards, receiving thank you letters, and comparing your process to competitors. 

Tip Two: Collaborate with Legal 

The relationship between the legal department and the pricing team can quickly become strained. This is especially true as you start looking at data collection. 

Some active steps you can take to get legal on your side include 

• Don’t record internal video calls 
• Use appropriate competitive intelligence wording (estimation, public sources) 
• Develop a “do and don’t” with legal 
• Explain your business motivations and discuss options with them 
• Be open and willing to help with “compliance days” 

By establishing this partnership, you can use your legal team as a tool rather than an obstacle. 

Tip Three: Attend External Networking Events 

The easiest way to get inspiration for your pricing journey is by connecting with other pricing professionals who are working on the same thing. No matter how long you’ve been in the business, there is always someone more experienced than you that you can learn from. 

When you find your contemporaries, you can create working groups to build up trust and regularly exchange tips. All of you working together can take pricing to the next level. 

Conclusion 

Value-based pricing has the potential to transform your company’s revenue, but it needs to be implemented with care. By anticipating challenges and fostering the spirit of collaboration, you can create a process that benefits both you and your customers.