Six Sigma Pricing > Improve: Build Processes, Systems and Tools to Assist Teams & Create Reporting Tools to Track Improvements
This is the fifth in a six part blog series on how manufacturers and distributors can apply Six Sigma methodology to the pricing function to generate repeatable margin gains. This blog covers the importance of driving incremental improvements through building processes, systems and tools to assist teams and create reporting tools to track improvements.
All pricing practice leaders know a disciplined process is needed to create and maintain Pricing Excellence – to effectively drive incremental improvements your team must focus on these four areas:
- Build process, systems & tools to assist team in exceeding their goals. (Automate at all cost)
- Hire based on foundational skills versus experience
- Train teams on key foundational skills that they will need to exceed their goals.
- Create reporting tools to track improvements
Processes, Systems, and Tools
As we covered in our last article on this topic, it is crucial that you implement real-time visibility into business processes defects in the Analyze phase to ensure you are focusing your improvement efforts in the right areas.
Other key elements of this phase include:
- Base lining your current pricing performance helps to understand what the potential improvement can be.
- Benchmark your goals and objectives based on the leader in your industry to drive toward World-class performance.
- Creating playbooks allows you to go from identifying to rectifying deficiencies in your pricing process.
- Implement automated deal tools so you can play offense or defense when appropriate by being able to make dynamic pricing decisions.
Hiring and Training
The real key to long-term success and to achieve Pricing Excellence – people. Always choose character over experience. Pricing is hard and you will train them to make excellent pricing decisions but they must have some core traits. Leadership, communications skills, and an analytical mind are the three most important traits. Quantitative, numbers driven decision makers such as former military academy grads, quantitative undergrad (Finance, Accounting, Physics, etc.) majors who also participated in a team sport, and yes even select sales people in your own company make great pricers.
To achieve long-term success, an effective and robust training program must be developed. It must include everything pricers will need to be successful and must be geared towards developing a proactive approach to identifying improvement opportunities in margin, market share, etc. They must be constantly driving change – the ability to make decisions faster and more accurately is a major competitive advantage.
Reporting tools to track performance in all areas are a must to drive profitable growth in your business and to drive discipline in the revenue side of your business.
Automated tools are needed to make effective decisions based on analytical scorecards. Answers to 95% of the questions about a deal should be at hand in near real-time and in a clear and concise format.
Creating Standard Operating Procedures are also key and must detail who does what in each step of each process and how decisions are made to eliminate confusion over price setting and approval authority, etc.
Six Sigma Program Overview
Six Sigma Master Blackbelt Greg Preuer, of SPA has created the first course designed to apply time tested Six Sigma methodology to pricing. Those who study with Greg will learn not only how to drive the pricing process but how to sustain the gains and automate the process. They will become Six Sigma experts (Blackbelt) in business process with a focus placed squarely on price management.
Graduates from this course will learn to chart a clear path to pricing improvement. They will learn each of the following steps:
- How to design and design goals which are consistent with their company’s pricing strategy.
- How to measure and identify characteristics critical for pricing success.
- How to analyze the current situation and steps along the way.
- How to design an improved alternative which moves closer to the desired result.
- How to verify that actions taken create the right results.
A Pricing Process founded on SPA’s Six Sigma Program includes the following:
- Negotiating strategy and tactics
- Value-based pricing
- Automated decision making tools
- Customer Profitability improvement plans
- Sales team selling value
- Pricing strategy and leadership
- Consistent and fair pricing architecture
- 2 to 4% growth in GM%
- Pricing based on customer sensitivity
- Continuous improvement focus
To learn how you can realize the benefits of SixSigma Pricing, contact SPA today at firstname.lastname@example.org or 216.455.1545.
The following is the remaining area we will dive into in a future article in this blog series that will help illuminate the path to Six Sigma Pricing Excellence.
- Control: set and enforce pricing authority levels and repeat previous steps as continuous improvement never stops
Upcoming SPA Events
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