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How I “Cut My Pricing Teeth”

Baby Money
“I cost my company more than double my salary that day.”

Definition:  It’s a metaphoric reference to when a baby’s teeth first appear. They grow (cut) through the gums – often painfully, which also gives us the figurative usage teething troublesOnce the baby has “cut its teeth”, it’s properly equipped for the all-important “real-world” task of chewing solid food (metaphorically, for tackling more complex problems in professional life, etc.).

Two intense days in late September of 1997 are forever etched in my memory.  Pricing meetings with our distributor for the upcoming year – These were the days I officially “cut my teeth” in this business. The meetings were crowded with important participants including my boss, my boss’ boss, and 8 senior managers and VP’s from the distributor as well as the owner! And, I was late. Traffic killed me on the way to the meeting and I walked into a room filled with angry people waiting for me to begin. I barely had time to squeeze into my seat in the boardroom before the game started. Each of the distributor representatives had huge stacks of files and reports in front of them. Obviously they were prepared. I had little except a tiny $5 calculator, a printed out spreadsheet, a pencil and a red pen. Follow below for the story of how I learned what it takes to succeed in pricing negotiations.

Tim Jones - Chief Customer Success Officer
Tim Jones – Chief Customer Success Officer

I began working for Schieffelin & Somerset Co. in the mid 90’s after an enjoyable career as a professional soccer player and youth coach. I was green, but full of confidence on my first day on the job in New York City. As I learned the ropes of key account development and distributor management, I was fortunate to have managers who gave me lots of exposure to the inner-workings of high-level distributor partnership building, and the negotiations required to do business together. I was given the perfect opportunity to jump into this business.

After a few years of key account development and lower-level distributor management, I quickly graduated to a senior position with big responsibility. Number one on that list of responsibilities was the pricing of our entire portfolio of products in the State of New York; arguably the most important market in the world for our brands. I knew the basic math involved in how to calculate margins, but the financial negotiations with our distributors was a steep learning curve.

All this brings us back to me, sitting in that boardroom full of angry people. Almost immediately as negotiations began, we got into a sticky debate over a deep deal price on one of our brands. The room filled with cigar smoke as the distributors all lit up, laughed at my suggestions and glared at me when I attempted to negotiate hard. It was going to be a tough day.

smoke-filled-room-02Just after lunch as we moved to the champagne brands, I lived through the most important learning experience of my entire career. Starting the post-lunch session off with a smaller, less significant brand, I was feeling… let’s say, ‘empowered’ by the (numerous) Coca-Colas I’d downed during lunch. I fought hard for a deep discount that the distributor didn’t want to agree to. But I pushed. They got red-faced and lit up more cigars, and eventually gave in and agreed to my suggestion to work short on this brand. They knew it was a bad deal for them, but in the big scheme of things, it was inconsequential.

Next up, our biggest most important brand. We got through the basics but then it was time to discuss the by-the-glass programming; a huge strategic initiative for us – our number one priority as a company.  I suggested pricing. They refused and argued and rationalized for what seemed like hours. But their answer was still, “no”. I had used up what little negotiating power I had on the inconsequential deals I fought for earlier, while they were sitting powerfully at the head of the table. I lost the negotiation, and ended up funding the all important by-the-glass program with a huge investment from my company instead of getting the distributor to fund it. I cost my company more than double my salary that day.

I immediately realized that I had gone about the negotiations all wrong. I didn’t have the data to support my positions. I didn’t have the tools to calculate the big picture impacts of each deal. I was unprepared. I won a few battles, but had lost the war.

As the years went on and I continued to build fantastic relationships with my distributor partners and owners, I learned from them how to properly engage in pricing negotiations. They took me under their wings and taught me all the tricks of the trade and I am forever grateful.

Dash1I left that unforgettable meeting only to develop a killer spreadsheet to help manage pricing, which was seen as a best practice in our organization and was used by nearly every market in the country. My distributors were so impressed with it that they adopted it so as not to be out maneuvered.

Finally in 2015, we are able to deliver an even better solution than spreadsheets. The power of the GreatVines platform provides the ability to deliver a state of the art pricing tool with super-powered computing to model all of the solve for possibilities, plus unprecedented visibility and analytic functionality. A modern day tool for an age old business need. I enjoy winning negotiations, so I can actually say that using GreatVines Pricing is fun, especially when the system guides your modeling to deliver incremental profits! Game on!

Moral of the story: Don’t bring a knife to a gun fight. The ramifications are costly. Winning battles is good, but winning the war is the imperative. And… be on time.

 

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By | 2017-05-26T10:47:08+00:00 July 13th, 2015|3-Tier System, Pricing Management|