Question: The top question could be what is the best pricing model? Centralized, or central led, or decentralized? What are the pros and cons? What are the top corporate examples of each? Maybe something like this. I have changed one company from decentralized to central led, but my new role is to transform the pricing structure from decentralized to centralized.
Answer: Thanks for the question P. As all great pricing questions, here’s the answer … it depends.
First, what are you centralizing or decentralizing when you say “pricing”? Pricing is huge. It could mean tactical pricing like price book management and quoting prices from a deal desk, or it could mean strategic pricing, like figuring out the best pricing models to use or it could be somewhere between tactical and strategic, like setting one price for one product in one market. Let’s jump into each of these three.
Pure Tactical Pricing
Price book management is almost always done centrally. This is the tactical work of getting the new prices organized and published out to the company. Deal desk management (a team whose job is to quote prices) depends on what your buyers want and expect. I’ve seen this centralized, but that typically only happens when you make everyone buy in your currency, and I’ve seen it decentralized using the local language and currency. If your competitors have a decentralized deal desk, which makes it easier for locals to do business with them, then I’d suggest you figure out how to decentralize your deal desk.
Pure Strategic Pricing
These are pricing people who know the pricing. (I really like these people.) What I often find humorous is that these people almost never set prices. Instead, they work with other departments within the company to help them learn how to create and capture value. These people are almost always centralized. I know that Google has a team of internal pricing consultants. Their role is to help others get the pricing right. By being more centralized, they can help each other solve pricing problems within the organization.
Price Setters
Who sets the price and where do they sit? I’m a strong proponent that product management (PM) or product marketing manager (PMM) should be setting price because they are the people who best know the value of the product to the market. However, for any region in the world, requirements might be different, competition might be different, tastes might be different. It’s impossible to set one optimal worldwide price. For this reason, I’d strongly recommend central led here. The PM or PMM should work with local marketing people to determine the best price in each region. The PM/PMM knows the product and the intended value, the local marketing person knows the local situation. Together, they can find optimal pricing.
P, it really is a long-winded answer to just say, it depends. But I do hope that helped at least a little.
Also Read : Q&A: Pricing Old Inventory
