Ron Wood - Pricing Expert
The Founder and Director of Pricing Insight and one of Australia’s leading pricing experts.
Pricing has always interested me. When I was in my early twenties I privately tutored students in guitar. I quickly realised that a lot of students were unable to afford one-on-one tuition. So I offered a reduced ‘bring a friend along’ rate to make the lessons more affordable. I discovered that students got just as much value learning in pairs as on their own. The outcome was that the actual revenues per lesson increased and more students were learning guitar.
After finishing my business studies, I started working at a large Australian food manufacturing business. I quickly discovered that, in relation to pricing, no one really knew what they were talking about.
One morning, there was a panicked 7am meeting after it was discovered that a price promotion at a large retail chain in Australia Coles supermarkets clashed with a promotion for the same product at another large retail chain called Woolworths. The price clash meant that the product was 20c cheaper at Coles.
The Woolworths supermarket chain had written a letter to the food manufacturer accusing it of embarrassing them in the market and deducted the difference between the prices from their remittance. This ended up being a loss of $300,000 in pure profit.
It became clear to me that there was a lot of confusion about what the appropriate price was to set for this product and how to manage these prices in the marketplace.
It also became clear to me that the arguments put forth by the senior executives at the time were based on perceived truths about pricing and markets, rather than facts. It was hard to believe that there was no clear pricing strategy based on data. A loss of $300,000 was a very real number to me starting out in business, especially when I calculated that the business would need to generate $5 million in sales to make up that loss.
I was determined to find out more about what the right price for the product should be to improve profits for the business. My research culminated in a presentation to the national sales director. I was able to demonstrate that the business would miss its budget with its current pricing plan. I discovered that there were too many price promotions for products that were price inelastic. This meant that the document generated no value for the business and profitability was damaged.
My career in pricing starts
I was asked to work on pricing full-time and made head of pricing at the age of 27 with a team of 5 analysts. We set to work building pricing models, analysing price promotions, getting control of the promotional program across 45 different accounts, and working with supply chain to ensure forecasts were accurate. In the first year of operation, we were able to generate an extra $5 million for the business. It was an amazing time. I knew what I wanted to do and that was to build a career in pricing.
The experience convinced me that data, statistics and financial modelling brought together in a coordinated way could have a major impact on a business’ profit outcomes. On the flip side, it also became apparent that a business that does not have a clear pricing strategy and control over pricing tactics risks substantial margin impairment. A business culture that accepts independent and unstructured pricing decisions without accountability is a recipe for margin disaster.
We need to build a culture based on value and ensure that everyone is skilled to define, communicate and capture value. It’s better to cut through the kind of misinformation that leads to waste and accept that there are parts of pricing you can control, measure, model and strategize. It’s not all up to the market.
Establishment of Pricing Insight
I started Pricing Insight in March 2007 after I was offered three pricing manager positions at three different companies. I wanted to help all three companies and by this time, I had been a pricing manager for 10 years and wanted a new challenge. Starting my own pricing consulting business was the next logical step.
I also wanted to capture all the pricing knowledge I’d accumulated over the last 10 years. I realised that my approach to pricing was unique after attending an international pricing conference. I found the conference speakers to be too theoretical or generic in their descriptions of good pricing and far from my own experience. I believe practical approaches are needed to solve real world pricing problems. So I decided to write my own course and became the first person to teach value based pricing in Australia. That became the basis for my business and I started to educate company executives on pricing. Education has been part of the philosophy of Pricing Insight from day one.
I’ve worked with 100+ companies and educated over 2,500 executives. I firmly believe that education and learning are crucial to ensuring that good pricing practices are undertaken.
Pricing has real world consequences
Around the 20th of December one year, I heard that 55 workers were being let go from a building materials company I was working for. I was shocked that these workers’ families were approaching Christmas without employment. The company reasoned that poor profit margins meant the lay-offs were necessary. When I looked into it, I realised that the company would be extraordinarily profitable if they had charged an extra 2c per lineal metre for timber. We’re talking about timber that’s sold for $1.20 to $1.50 a lineal metre. And an extra 2c was all that was required for the company to afford full-time employment for those 55 workers for the next year.
The music of pricing
Curious about finding a methodology to solve complex pricing problems, I became interested in pricing algorithms. I completed a music teaching diploma at the Sydney Conservatorium of Music before I studied business and made it my focus to understand music theory and harmony and be able to write and read music. I realised that the systematic way of thinking in music could be translated into pricing. This allowed me to look at random pricing events and think about how they might be notated down, like music on a page. Musical notation is a system that tries to capture a very esoteric art form with many dynamic elements, such as pitch, tempo, rhythm, harmony and orchestration. I think that pricing, like music, can be notated and articulated. It needs interpretation and, of course, it needs to be performed.
Pricing Insight today
I make it my business to stay up-to-date with what’s going on in the pricing world domestically and overseas. And because I speak to so many people across so many industries, I get to see what’s actually happening. I study my clients in detail to understand what their challenges are. But I also look at what’s happening overseas to ensure that that the changes in organisational design and organisational structures, such as the impact of technology, and the disruption of the internet, are all being channelled into pricing strategy within a business.
I enjoy the discovery of something new and working with other people who are committed to transformation.
I have learned from my clients the importance of balancing out competing demands. Something that might appear to be a number one priority will in fact have to be number two or three.
Clients have often asked me to come back on multiple occasions because as they go down the pricing improvement journey, they realise how much more there is to know.
As the Founder and Director of Pricing Insight and one of Australia’s leading pricing experts, Ron is a regular speaker for the International CEO Forum, International CFO Forum, American Chamber of Commerce and Chartered Institute of Procurement & Supply. He is also the author of Pricing Insight’s executive training program, Pricing Masterclass.
Ron has trained over two thousand senior executives in value based pricing techniques and margin enhancement strategies, and has devised unique and internationally recognised programs that equip executives with the skills they need to deal with pricing challenges in a practical and pragmatic way.
His unique approach to consulting is the result of delivering real world pricing solutions for over fifteen years to ASX and NYSE listed companies in Australasia, South East Asia and the USA. His experiences span industries of manufacturing, financial services, construction, capital equipment, metals, retail FMCG, air freight, tourism and agriculture.
His consulting clients include some of Australia’s largest Private Equity, ASX and Fortune 500 listed companies and he works with C-level and senior sales, marketing and finance executives to build commercially effective margin improvement solutions.
Ron works closely with sales, marketing and commercial teams to develop value based pricing solutions to generate margin and profit improvement.
Ron is available to speak at conferences and public events in the area of value and pricing strategy.
Previous speaking engagements include:
- Sandvik International CEO Conference, WTC Amsterdam
- CFO Forum, Sydney
- CEO Forum, Sydney & Melbourne
- CEO Institute
- CIPSA, Melbourne
- American Chamber of Commerce Conference, Sydney