Q&A: Where Should Pricing Sit in a Company?
Question: Hi Mark – Where should pricing sit, or where does it typically sit? Finance, sales, marketing, product? What are best practices? – A
Answer: Hi A, The answer is the standard consulting answer, “it depends”. However, since I’m an educator and not a consultant, let’s try to clarify this a little.
Pricing is Much More Than Attaching a Price
The first question is what do you mean by pricing? Pricing is a HUGE topic.
Just some quick brainstorming, but here are a few activities that go along with pricing:
- Setting a list price for an offer.
- Defining packages of features that add the most value to a market segment.
- The escalation process when sales asks for very large discounts.
- Sending out pricing quotes.
- Negotiations that happen between sales and buyers.
- Monitoring results like Average Selling Prices (ASPs) as an early warning that something is happening.
There are many more activities that you could say are part of pricing.
Managing the Role of Pricing in Your Company
Each of these efforts could ‘live’ in different parts of your company.
One of my recommendations to companies is to list all of the activities that contribute to winning sales at higher prices, and then decide if you are doing each of them well enough.
Back to the original question: “Where should pricing sit?” Here are my opinions on some common and obvious activities:
Setting List Prices: The act of putting a list price on a product should belong to product management, or at least product marketing. These are people who should understand how the buyers perceive the value of the product.
Price Escalation: The price escalation process should sit under whoever has P&L responsibility for the product.
Quotes & Negotiations: Quoting deals, often called a deal desk, is usually in the sales department. Negotiations is almost always the responsibility of salespeople.
The Role of Pricing Teams
If you have a pricing department, I’ve seen them in many different teams. However, pricing teams generally fit very well under finance. Pricing teams serve a number of roles and provide a vital asset of education and resource to your company.
Pricing teams should be active in:
- Educating others in the company about pricing and value.
- Creating tools to help the other departments win deals at higher prices.
- Monitoring results and coaching colleagues.
Pricing is both HUGE and under-emphasized. It’s great to see you asking the question. Hope this helps.
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Mark is a pricing expert who helps companies understand value, how to create it, communicate it and capture it. He has a PhD from U.C. Berkeley and an MBA from Santa Clara University, plus 25+ years pricing experience. As an educator, speaker and coach, Mark applies innovative, value-based pricing strategies to guide growth and increase profits for large and small companies.