The Wealthy Gardener and Pricing: Five Lessons for Your Company
Guide your company's pricing strategy and results with these five lessons.
I generally spurn books about building wealth for two reasons. First, there are way too many of them — and way too few with something new to say. Second, I am generally turned off by our society's increasingly unhinged obsession with accumulation and dollar-denominated status.
I started The Wealthy Gardener by John Soforic pretty much out of a hurried lark. I had seven Audible credits to spend before my subscription would be canceled and only a few minutes to select books. So, what did I have to lose? Then I noticed the book had unusually good reviews and wanted to find out why.
As a parable used by a father to give life lessons to his son, I found it a compelling rally to arms to use our lives and actions well. Where I disagreed, it was interesting enough to make me at least consider disconfirming arguments.
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Most helpfully, I found its lessons often applicable not just to individuals but also to companies. As an expert in pricing, I typically describe what I do as "helping companies harvest the value they already create." The Wealthy Gardener, too, is quite focused on value creation and harvesting the full potential of one's life.
Here are five lessons from the book to consider.
1. Others won't see your value without clear signals.
Individuals and companies both must focus on creating value with their time and signaling the value of their contributions, products or services in a way others can easily see. For individuals, the book points to focus and clarity of purpose and effort as such signals.
For companies, the clearest signal of the value of their efforts is their pricing. Premium and confident pricing signal a company that delivers differentiated value. When companies decide to sell for less, they must be clear why (perhaps to serve vulnerable customers, to help nonprofits or to reward volume commitments). Otherwise, they risk being perceived as lower-value producers.
2. Your future success stems from what you do today.
Most individuals and companies have plans for tomorrow they never seem to get to. It is OK to have plans that can only be accomplished over time. Getting to none of them today is where we often stumble.
Many companies have this pattern when it comes to paying attention to their pricing, the key activity that drives their optimal "harvest," resulting in years of suboptimal, and eventually out-of-touch, pricing. This leaves lots of money on the table (harvest that rots) and eventually may erode even their value perception in the marketplace.
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3. You can only control what you do, not everything else.
We all know this as individuals and hopefully say it to our kids, too. Tough breaks, rejection and "life is unfair" happen to all of us. As long as we are proud of the effort and focus we commit, good things will eventually happen and seemingly unlikely good breaks may arrive sooner than we think.
Similarly, a company cannot fully control how customers respond to its prices, but it can control the effort it puts into crafting and implementing its pricing strategy. This includes conducting thorough market research, analyzing competitors' pricing and understanding their target audience's willingness to pay. By investing effort (which includes resources) in developing a well-informed pricing strategy and capabilities, a company can win out over time, as well.
4. Small, consistent actions grow big results.
This idea, like the one before, is hardly new. Yet too many of us get easily discouraged when big results don't happen quickly and relent or abandon course (gym, anyone?). Conversely, when we do see big results, we sometimes sit on our laurels for a long time and forget to build on them. Soon enough, other, more consistent tortoise-like compounders have leapfrogged us.
Likewise, pricing strategy efforts can and often do result in exceptional gains and value creation in relatively short time periods (months). But we tell clients, "Pricing is not an event, it is a process," because those who stop iterating on their gains open the door to losing them.
By continuously making small improvements to their pricing strategy, companies can better understand their customers' behavior and preferences and make data-driven decisions to optimize their pricing. Over time, these small changes and consistent "inspect what you expect" efforts can significantly impact a company's bottom line.
5. Your 'why' fuels your success, not profits.
Doing what we love and knowing our "why" is the most likely ingredient for long-term success. If our goal is money itself or another "success" status indicator, we can fail not just to be happy, but eventually wear off the very drivers of our early success.
Similarly, companies that seek profits without a balanced consideration of their mission and how they contribute a "net positive" to their customers and communities may compromise their mission and the customer lifetime value that drives their long-term success. Just as important, they may be increasingly run and staffed by unhappy, unmotivated or socially insensitive managers and employees. We use the phrase "mission-driven pricing" to describe a mentality of mission-first that ensures success and profits both follow and keep growing.
While these lessons barely do justice to the book (and in isolation may sound like things you've heard before), it's the full storyline that compounds into an opportunity for introspection. More important, while you may disagree, as I did, with occasional points, I hope it will lead you to reconnect with your own — and your company's — garden of growth opportunities. Remember not to leave them all for tomorrow.
The information provided here is not investment, tax or financial advice. You should consult with a licensed professional for advice concerning your specific situation.
Robert Ribciuc, CFA, CPP, NACD.DC is a pricing and revenue management expert, and Managing Partner of EBITDA Catalyst.
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