More and more companies are building pricing teams. These pricing teams effectively act as internal pricing consultants and are the "go-to" guys on how to apply pricing concepts - they understand both the pricing systems used within the company and the corporation’s objectives and how pricing contributes to achieving the required goals.
Pricing touches on almost every department within a company - it certainly effects sales, marketing, and finance. A pricing team can balance all of these departments' interests in creating company-wide processes and systems.
Pricing teams have several critical roles:
- They provide pricing expertise to product lines.
- They help define, resource and implement new pricing tools and processes.
- They take a lead role in monitoring pricing effectiveness. They usually set up the systems to collect the right data and share that information with the product teams. They frequently build in alerts to notify the product teams when something changes.
- They work closely with product managers or product specific pricing people to make sure they know how to determine the right price.
Every business will naturally have a slightly different approach to pricing optimisation – and who has overall responsibility for this vital issue within their organisation. If pricing is indeed central in your company (and it should definitely be so), there will probably be plenty of people with strong opinions on the subject, leading inevitably to conflict from time to time.
For these reasons a pricing team requires a strong leader, whomsoever that will be.
Who's in charge?
The leader of the pricing team should typically be from the marketing or product departments.
Most marketing or product directors have enough experience and authority to run these projects effectively, are trained in the ways of customer development, and are far enough removed from a direct incentive to think objectively of the organisation as a whole.
Pricing leaders need to focus on both customers and the long-term success of the company - sales and finance directors are certainly capable but they may provide self-serving calculations.
There should always be one final decision maker on the pricing team and it's either the person in charge or the business leader – sometimes she fulfils both roles.
Team leadership and communication
A pricing team leader is successful only when he is a strong source of inspiration and motivation for his team members – and a good communicator.
The team leader should have the ability to see pricing problems in the wider context, i.e.
- Where are we now?
- Where do we want to be?
- How do we get there?
- Which way is the best?
Other members of the pricing team
We've already established that pricing correctly is vital to the overall success of the business, so the pricing team leader will realise the importance of having an effective team effort promoting the best prices to increase profits.
The purpose of the pricing team may vary slightly from organisation to organisation but the main focus should be to ensure an equal say on pricing concerns from all corners of the organisation.
So, an effective pricing team should have representatives from all relevant departments.
Equal representation is crucial, because every part of even a small company will have a perspective that’s important to the pricing process.
Sales will give valued input as to how actual conversations with prospects are progressing, particularly when it comes to quoting a price. They normally work closely with marketing and product development who are of course already heavily involved with pricing issues.
Product development understands the route to future profit and where new areas of growth in terms of value will start to emerge. Marketing will provide the necessary customer demographic data.
Finance will contribute to the discussion on price changes from a budget and growth perspective. It would seem imperative also for the issue of prices to be the concern of the Commercial Director too as this person is responsible for creating business proposals and writing bids.
Many organisations employ pricing analysts who work closely with the sales department. The main duties of pricing analysts are to:
- review business accounts to ensure accurate pricing
- establish criteria to achieve the best customer pricing
- help a company's sales force with pricing negotiations
- analyse contracts for under performance
- eliminate waste or overspending
If you employ pricing analysts, a representative should have a seat on the pricing team.
"Pricing is the moment of truth – all of your marketing strategy comes to focus on the pricing decision." Raymond Corey
Managing your prices
The pricing team should be constantly re-evaluating the company pricing strategy and customer demographics.
It might take some time to collect all the necessary data, make decisions on changes, run an impact analysis, and finally, implement the best pricing strategy or make price changes - but try not to panic over the amount of time this may take as there will invariably be other pressing priorities – and the pricing team does not sit full-time.
Larger organisations however should have someone pretty much full-time with their eye on pricing.
Typically it shouldn't require major overhauls but just small tweaks here and there. You should be making minor changes every three months, and major changes (if required) every six months.
Bear in Mind
Always bear in mind that any decisions on prices should be a collective, team effort and that many departments have a valid reason to be consulted and represented on a pricing team.
The overall key, however, is to ensure that pricing is given due attention and focus. If it is just an ad hoc process within your organisation, you run the risk of losing margin unnecessarily - or worse.
Grow Faster By Making Pricing Strategy a Team Effort
The Anatomy of a Successful Pricing Analyst
Where Should the Pricing Function Reside in Your Business?
5 Signs You're a Pricing Genius
11 Principle Responsibilities of a Pricing Manager
6 Traits of High Performing Pricing Managers
5 Ways Price Management is Changing
Pricing Strategy: Tactics and Strategies for Pricing with Confidence, Warren D. Hamilton, 2014.
Pricing with Confidence: 10 Ways to Stop Leaving Money on the Table, Reed K. Holden and Mark Burton, 2014.
Managing Up, Harvard Business Review 2014
Pricing for profit: How to Develop a Powerful Pricing Strategy for Your Business, Peter Hill, 2013.
How to Improve Your Leadership and Management Skills – effective strategies for business managers, Meir Liraz 2013
Pricing Strategy: How to Price a Product, Bill McFarlane, 2012.