Who Owns Pricing?

org chart bucketsThis is one of the most frequent questions I’m asked.  Should pricing belong to Finance, Product Lines (product management), Marketing, Sales Operations (deal desk), or even Sales?  What do you think?

My answer:  “Yes!”  Effective pricing requires participation from all of these departments.

Finance must provide margin guidance and help with monitoring of actual results against the expected results.  Finance and other executives are often involved in crafting the right pricing strategies.  They run what-if analyses to help predict the results.

The product lines must understand the market and the value the products have to the market.  They must be intimately involved in setting the price.  They are also the last level of escalation to approve deep discounts for important strategic customers.  Since profit and loss responsibility typically lies with the product line, they must have a lot of say over pricing.

Marketing needs to understand pricing exceptionally well so they can communicate the value to the customers.  They need to create the tools that empower salespeople to win at the highest possible price.

Sales Operations or the deal desk quotes individual deals.  They are often the front line to the customer for price.  They execute the pricing strategies and levels so they need clear guidelines to follow.  They are often involved in the monitoring of the success or failure of pricing.

Salespeople are truly the front line of value communication.  They negotiate with the largest customers.  They MUST believe that the value delivered by our product is far more than the price we are charging.  Sales has a huge impact on whether or not the company achieves the prices set by the product line.

Back to the original question, “Who owns pricing?”  Every department owns a piece of pricing.  If you decide to bring on a pricing team, they need to have influence over every one of these groups.  That means one of two things:  1. You bring on a team of highly influential leaders who can lead and generate change without authority or 2. You put pricing in the most powerful department in the company, possibly even reporting to the CEO.

My preference is #1.  Hire true leaders.  Then it doesn’t really matter where pricing sits.

 

Picture by Colleen Simon for opensource.com