Many of us tasked with price ownership internal to organizations are tasked with an unenviable responsibility: somehow get two distinct separate roles or departments to coordinate and execute on a strategy (commonly given by upper management) even when those directives might be in conflict with their own management's guidance. In other words, "Ignore them, listen to us!"
Okay, it may not be that bleak of a picture, but sometimes it feels like it. This is one of the reasons we wholeheartedly believe in conducting “day in the life” reviews of sales or product. But as Pricing, we must still manage the right expectations, execute on our strategies, and help others along the pricing chain do the same. Even if those strategies are, at times, in conflict with our own. This is where we must work harder to get those commonly involved in the pricing chain (Sales and Product Management) involved.
Take a step back and look at who is discussing pricing in the organization. Although in the day-to-day activities of pricing, we may forget that pricing decisions DO happen elsewhere, we cannot overlook this fact. After all, how can we help evaluate our marketplace without prices that are already set or without prices communicated to customers? This is where Product Management and Sales are involved, and it is because of this fact, we as Pricing, must account for and include those roles for the overall betterment of the enterprise.
Let’s examine one situation from the past. Pricing was tightly entwined with Product Management (in fact, both VPs reported directly to the CFO, who encouraged cooperation on pricing). Whenever new products launched, products changed life cycles, or a market shift occurred, Product and Pricing worked side-by-side to understand the market accordingly.
However, they continually had issues with their price expectations, vis-à-vis sales communications to customers. The problem here was Sales. It’s not that they were bad people or did not want to cooperate; it was that the Sales VP had a different vision of what his team’s responsibilities were. This was further exacerbated by incentive programs not aligning to collective goals. Pricing and Product struggled to set and keep prices at a certain levels, while Sales maintained behavior with their incentive structure and Department Head guidance. The distrust between the two departments grew over time, and led to an uncomfortable working environment.
It was not until the conflict boiled over into the Executive board room that change happened. The Executive Team assigned a Change Management Leader to better understand where the breakdowns were occurring and then created a cross departmental team to realign processes to meet the overall Business Goals and Pricing Strategy. Incentives were further brought into a semblance of alignment, and the working environment improved resulting in better financial performance.
Pricing may sometimes have an unenviable organizational task, but regardless it is always a powerful lever for success. As a result, working closely with other departments as price: Setters, Users, and Influencers, is paramount. Soliciting input, and garnering assistance through cross-functional teams, can re-define broken processes. Furthermore, these collaborative approaches can focus on and assimilate the unique departmental needs of, “What is in it for me?” and allow everyone to share in the successes.
Continue on in 2019 with confidence
Pricing shouldn’t be done by your gut or by the books. Careful evaluation and analysis will give you reliable information to make decisions and communicate those with confidence. Want to know more about strengthening 2019 and approaching 2020 pricing decisions? We’re here to help.
