At Holden Advisors, we often speak with General Managers (GMs) about commercial transformation. We want to understand not only what is happening in their markets and their businesses, but also the effectiveness of their commercial teams. Recently, we asked GMs a specific question about pricing: “How can Pricing Leaders elevate the impact of their function and better serve their companies in the creation and execution of overall corporate strategy?”
Big question! Truthfully it’s a big question for any department, but particularly so for pricing.
What is your initial reaction to this question? Do you:
- Question the role of pricing in corporate strategy?
- View strategy as the ultimate distraction for pricing?
- Wish that your marketing and pricing departments would just get along?
I’m guessing that some, or most, of you are nodding.
How can pricing leaders elevate the impact of their team and drive the corporate strategy?
Obviously, GMs are smart people. They must be in order to run businesses. If that’s true, then why aren’t more GM’s leveraging the power of their pricing function? In our experience, the best organizations have elevated pricing to a center of excellence, however the fact remains that pricing is still a completely new skill for many.
Our research only further supports this dichotomy. When asked about the ideal vision for the pricing function, GMs opinions varied. Responses included:
"I expect pricing to proactively set and reactively adjust strategy to meet profitability metrics..."
"I need pricing to align value creation and create competitive advantage..."
"I just want pricing to extract a fair price in market..."
Could there be a way for pricing to play both a strategic and tactical role without compromising the commercial structure? One GM we spoke with had a unique solution. Instead of overburdening a single team, this executive chose to establish two distinct teams and achieve each vision listed above concurrently.
- A strategic pricing team focused holistically on revenue and profitability
- A tactical pricing team focused on competitive intelligence, market dynamics, acute deal pricing and deal negotiation
In theory, this division of labor creates the perfect partnership. Tactical pricing then has the time and attention to earn the trust of the sales team and become an advocate. On the other hand, the strategic pricing function can allocate the time and resources necessary to drive long term strategy and increase shareholder returns.
Regardless of the org chart, pricing must evolve as a function and it all starts with the leadership team. Walls will need to be broken, communication channels opened, and shared KPIs defined. The challenge seems insurmountable, but it is possible!
What is the current role for your pricing team? What would you like it to be?