Research Report - Pricing Actions and Pricing Portfolios
Steven Forth is a Managing Partner at Ibbaka. See his Skill Profile on Ibbaka Talent.
Ibbaka has an ongoing research program in market segmentation, customer targeting and pricing. This connects to our other research in talent, competency and skill management. Market research is outside in. Skill research is inside out. We use this research to help our customers move their businesses forward and to advance the state of the art in our focus areas.
Part of our research is into portfolio management. Not financial portfolios. That is not our area of focus. We are concerned with the portfolio of actions you can take. This could be investments in skill and competency development or the kinds of pricing actions you should be preparing so that you can respond to and shape markets and not react. The latter is the focus of our most recent report.
You should read this report, and put its recommendations into action, if you are responsible for pricing, revenue or product leadership. It will give you some tools and processes to manage pricing and pricing investments (yes, you need to invest in pricing if you are going to get the full business impact).
Recommended Actions to Build a Pricing Action Portfolio
Review past pricing actions and record the results, including the ROI
Research your own product/service roadmap and find out what you can about your competitors
Research the scenarios you may need to respond to over the next three-to-five pricing cycles
Build an inventory of possible pricing actions
Estimate the investment, time frame, risk and return for each pricing action
Allocate each pricing action to a grid, organized by risk/return, timeframe and probability the action will be taken (include some pricing actions that will give you options for different scenarios that may emerge)
Select for investment the set of pricing actions that has the best risk/return profile over time given your current business strategy
Monitor investments, actions, outcomes and returns
If you are interested in our research, we have three surveys open at present. Each of these is part of a larger project to understand what is happening in the world, how we can work with our customers to shape the world to their and their community’s advantage and to advance the state of the art.
What pricing actions are you taking in response to the Covid 19 crisis?
What scenarios are you planning for? Building a pricing action portfolio.
Concept blending and innovation
Our approach to innovation is grounded in design thinking and embodied cognition. Pricing action portfolios are an example of this. They are basically a mashup or concept blend of portfolio theory and scenario planning applied to pricing.
Concept blending comes from the work of Mark Turner and has been influential in modern approaches to innovation. The basic idea is that we can see the world in new ways by connecting two different frames. Ibbaka’s basic approach of applying design thinking to pricing is an example of this.
In our work on pricing action portfolios, we combined portfolio management from financial investments and scenario planning to the domain of pricing. This led to the idea that you should manage your potential pricing actions as you would an investment portfolio. We were developing the frameworks, measurements and tools needed to do this when the COVID 19 crisis hit.
Many things changed, for ourselves, our customers and our customers customers. None of which we had predicted. (Could we have predicted this? Yes. The risk of a global pandemic was well understood in the public health community, but the social and economic implications were not widely appreciated.) This sent us back to think about frameworks that could have helped us better prepare our clients. Scenario planning was the obvious candidate. It has helped many organizations prepare for and adapt to changed circumstances. We were thinking of how scenarios helped Shell respond rapidly to the oil crisis or how the Mont Fleur scenarios helped to guide South Africa past apartheid.
Blending portfolio management with scenario planning guides our current approach to pricing action portfolios. These portfolios should help you to
Make systematic investments in pricing actions
Manage these investments as a portfolio with an eye to risk and return
Prepare for for more than one scenario
