One of the questions we’re asked most frequently at INSIGHT2PROFIT is “How do I structure my pricing team?” The quick answer is that it depends. Small companies may only need a single person focused on pricing, whereas larger businesses may need a team. Regardless of size, it’s important that someone at your company has clear responsibility and accountability for managing pricing.
Common Mistakes with Pricing Teams
Two mistakes we often see is that businesses relegate price management to an administrative role, and they require the pricing team to report to the sales team. Both can have dire consequences.
Price management is akin to profit management. Strategic perspective and business leadership are critical. This is vastly different from price administration, which typically involves inputting prices into the system or running pricing reports at the end of the month.
A good pricing manager will aggressively pursue every opportunity for profits. This may occasionally put the pricing manager at odds with the sales team, which wants to aggressively pursue every opportunity for growth. This push-pull dynamic can actually be incredibly healthy and can help maximize both profits and growth.
On the flip side, having the pricing team report to sales is a bit like asking the fox to watch the hen house. This type of structure increases the chance of pursuing sales at any cost—even if they’re unprofitable.
Instead, we recommend building a pricing team that reports to the marketing department if the company has one; product management or finance are other acceptable options.
Ideal Structure for a Pricing Team
The specific number of people on a right-sized pricing team will vary with each company but likely includes these three roles.
Lead Role: Strategic Pricing Management
This person is in a leadership role and is the company advocate for margin and profit management. The pricing manager strives to balance growth with profitability—and isn’t afraid to discuss (and defend, if needed) their pricing recommendations.
The conditions that impact pricing strategy are always evolving, and decisions are only as good as the data analysis behind them. This role is tasked with capturing the data, conducting the analysis and interpreting the story behind the numbers so that the strategic pricing manager can make informed, insightful decisions.
This role manages the prices in the system. This may range from data entry to actively monitoring and reporting on customer discounts, pricing exceptions and more.
As you identify candidates for your pricing ‘A’ team, look for individuals who think analytically and who know how to communicate with confidence. These individuals will likely be involved in daily discussions with the sales team, conducting contract negotiations and opportunity analysis. Most importantly, they’ll need to be able to stand on their own if and when recommended pricing changes are met with resistance.
Ultimately, the members of your team must be able to sell the changes they recommend—and do so in a way that brings the company together and sets the stage for good things to come.
We recommend starting by clarifying the objectives you’d like to achieve. Define how you’ll measure success. And start building the data infrastructure that will support the pricing decisions you’ll need to make.
A good pricing partner can help you get your team up and running. To get started on the path to increased profitability, schedule a time to talk to one of our senior advisers today.