Impact Pricing Blog

Pricing People Shouldn’t Set Prices

This title feels wrong, but it isn’t.  When I’m asked, “who should own pricing?” I answer the same way every time. Someone who knows the value of the product. In most companies, this is product management or product marketing.  

You may be thinking, “yes, but product people aren’t experts in pricing.” You are right. We either need product people to understand pricing, or pricing people to understand the value of every product. Or … maybe they work together to figure out the optimal pricing.

Typically, only large companies have dedicated pricing people. Large companies also have many many products. Too many products for a pricing team to master. To properly set a value-based price you need to know the following: product strategy, market, market segments, the problems solved in a market segment, the value of solving those problems, the competition, the differentiation, and the value of the differentiation. 

This is why pricing people should not set prices.  

But if pricing people work closely with product people, they could teach product people how to think about value, both inherent value and relative value. They could strategize together on how to build a product portfolio that captures the most from a market.  

Besides helping product people understand pricing and value (which is a big job already), pricing professionals also create and modify processes to get the right price for each customer onto quotes and hopefully invoices. They typically publish and manage the price book. They need to monitor KPIs and provide early warnings to those with P&L responsibility. They should make sure that every relevant role in the company understands customer perceived value, especially salespeople.  

Pricing touches many different departments and people in the company. Someone needs to gather all of the inputs and create strategies and tactics to maximize revenue and profit. Pricing is a huge job.  But setting prices is best left to those who know the value of each product.

Tags: pricing, pricing skills, pricing value, value-based pricing

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