Pricing Is a Neglected Lever for Industrial Companies Transitioning to Digital

Stephan Liozu wasn’t born a pricing guru. In fact, Stephan started his career in his home country of France, as a business leader — and ultimately, CEO — for several glass and cement manufacturers. “You can’t get more industrial than that!” Liozu says. “I like the industrial setting because I like to see things and touch things. When I was a CEO, I would go and walk the plants and ‘kick the tires’ with the workers. It’s just where I’m most comfortable.”

But after many years of “kicking tires,” Liozu developed another passion: digital transformations, and specifically, how critical it is to get the pricing strategies right when transitioning into the digital space, especially for industrial and manufacturing companies.

“As CEO of a medium-sized company, I realized pricing was totally neglected,” he says. “So I got very interested in the field, and decided to go back to school at Case Western to study it. Once there, I figured I may as well go ahead and get a PhD, and my dissertation became my first book, ‘The Pricing Journey.’”

Today, Liozu is considered the go-to pricing expert for companies looking to transition into subscriptions, working with companies around the globe from Brazil to Belgium and in virtually every manufacturing industry, including tooling, petrochemicals, tires, and automotive. And this is in addition to his two “day jobs”: Chief Value Officer of the Thales Group and Adjunct Professor & Research Fellow at the Case Western Research University Weatherhead School of Management. He’s also got a whole slew of pricing bona fides: he’s a Certified Pricing Professional (CPP), a Prosci© certified Change Manager, and a Strategyzer Business Model Innovation Coach. And since his first book in 2015, he’s authored or co-authored nine more, including The ROI of Pricing, Pricing and Human Capital (2015), Pricing and the Salesforce (2015) and B2G Pricing (2020).

The price of going digital

With his deep experience in the trenches in the industrial sector, Liozu understands the challenges of transitioning to subscriptions probably better than anyone. While the Internet of Things (IoT) is obviously making headway in specific verticals like medtech, energy, and smart building, Liozu sees huge swaths of industrial sectors that haven’t yet been touched by digital.

“Unlike younger digital natives, we were born in the industrial space,” Liozu says. “And it’s a field that’s not known for being early adopters of new technologies. But I think the pandemic accelerated the sense of urgency about this, and lots of companies are taking this more seriously.”

“Unlike younger digital natives, manufacturers were born in the industrial space — a field not known for being early adopters of new technologies. ”

— Stephan Liozu

Liozu has seen even the most traditional manufacturing companies come around to digital and subscriptions. “They see the writing on the wall and don’t want to be the last ones on the bandwagon,” he says. “They realize with the consumer side of things going lightyears faster in the digital space, they might get left behind. So they’re tip-toeing in. Creating an incubator, making acquisitions, or beefing up their digital innovation offices.”

Slow, steady, focused

It’s clear to Liozu that despite the new energy and urgency to get on board the digital transformation train, it’s not going to happen overnight in the industrial world, nor should it. “It’s what I call digital transformation 2.0,” he says. “In the past, industrial firms poured billions in digital transformations trying to strike gold. For many of them, the lack of focus led to many failures and false starts. But in the next three to five years, digital transformation 2.0 will be about focus, impact, and profitable growth.”

“In the past, industrial firms poured billings in digital transformations trying to strike gold. But in the next three to five years, digital transformation 2.0 will be about focus, impact, and profitable growth.”

— Stephan Liozu

And Liozu is quick to acknowledge it won’t be easy. Remember, he’s focused on practical and realistic solutions in the digital space. “Yes, I’m the cold-shower guy,” says Lizou. “The digital transformation of the industrial and manufacturing sectors is a struggle every day.”

IT matters — and so does marketing

One reason for the struggle is the industrial sector’s relative lack of marketing maturity, especially when it comes to having a close relationship with their customers and mining those all-important customer insights. Because in the digital space, catering to the customer is, well, everything. “Leveraging customer data can’t be an afterthought or part of the 28 other projects running as part of digital transformations,” says Liozu.

To help industrial and manufacturers clear this major hurdle, Liozu says it’s crucial to have an experienced marketing or sales executive on the transformation leadership team, sharing the duties with an engineering or IT exec. He admits (somewhat proudly) this is quite controversial among his clients and peers. “Engineers like to design and build stuff, and the business and customer marketing side is often an afterthought,” he says. “It’s a big mistake to let them lead your transformation alone.”

Liozu says industrial companies going into digital typically put 90% of their attention and resources on technical, IT and engineering and 10% on marketing value and sales. He thinks it should be equal: 50/50. “Invest in more market research before you invest in more servers.”

The price is right (or needs to be)

And Liozu believes that while any company hoping to succeed in subscriptions needs to nail their pricing, it’s even more important for industrial companies. But it’s also harder. That’s one reason he’s writing a new book, “The Industrial Subscription Economy” (due out in 2021). He calls it a “cookbook” full of tips from the best subscription experts in the business as well as stories of successful B2C models translated into practical action-oriented strategies industrial companies can use today. “We want to show these companies that it’s possible and it’s been done,” he says. “Your first efforts won’t be the best, but it’s important to get started.”

One of the main sections of the book will be devoted to pricing, because besides being one of Liozu’s passions, he considers it a misunderstood and often neglected lever for business, especially in the digital world. “At most companies, pricing is distributed among sales, finance, accounting, and marketing teams; there’s no dedicated pricing team on board,” he says. “In fact, only 22% of global fortune 500 companies and only 15% of industrial companies have pricing teams. Executives will say they need to manage margin, not pricing. And it is easier to cut or optimize costs than to go in and redesign your pricing. But the ROI for pricing strategy is huge. CEOs really need to pay attention.”

“Only 22% of global fortune 500 companies and only 15% of industrial companies have pricing teams. Executives will say they need to manage margin, not pricing. And it is easier to cut or optimize costs than to go in and redesign your pricing. But the ROI for pricing strategy is huge. ”

— Stephan Liozu

He hopes with his new book, he’ll help to play a part in speeding up the digital transformation in industrial companies. “It’s finally become clear to everyone that digital and subscriptions aren’t a fad,” he says. “This isn’t a Y2K thing. And though we lack those huge success stories you get in the B2C world — the Adobes, the Googles, the Airbnbs — if we stay focused on what’s really important to the customer and deliver something that makes a difference (and price it right, of course!), there is a lot to get excited about.”

Pricing Is a Neglected Lever for Industrial Companies Transitioning to Digital

Pricing expert Stephan Liozu on getting pricing strategies right when transitioning into the digital space

The price of going digital

“Unlike younger digital natives, manufacturers were born in the industrial space — a field not known for being early adopters of new technologies. ”

Slow, steady, focused

“In the past, industrial firms poured billings in digital transformations trying to strike gold. But in the next three to five years, digital transformation 2.0 will be about focus, impact, and profitable growth.”

IT matters — and so does marketing

The price is right (or needs to be)

“Only 22% of global fortune 500 companies and only 15% of industrial companies have pricing teams. Executives will say they need to manage margin, not pricing. And it is easier to cut or optimize costs than to go in and redesign your pricing. But the ROI for pricing strategy is huge. ”

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