Where Is Pricing Set In 2020? – episode 3
In this episode of Pricing College, Aidan and Joanna discuss where pricing is actually set by companies in 2020. Pricing can often sit somewhere in marketing, finance, sales, commercial, or merchandising. There are no incorrect setups – but certainly, there are ways to improve.
TIME-STAMPED SHOW NOTES:
[00:50] Pricing can be set in companies in many areas. In fact, many businesses have no dedicated function.
[01:27] Only very few businesses have a dedicated function.
[01:53] Ask the question: Who sets the prices?
[02:00] Only companies with a revenue of over $100m p.a. can invest in a pricing team.
[03:05] The person who is capable of setting the price may not be who you initially expect.
[03:40] What is a good pricing manager?
[04:20] Pricing managers are more than spreadsheet experts.
[04:55] Closing question: In your company, who sets the pricing?
Following from the last introductory episode on What is pricing?, we want to discuss “Where is the pricing function in most companies in 2020? Where is the pricing set?”
Well, a lot of companies don’t even have a pricing function. Still, pricing can be set anywhere around the business. Most commonly, we see prices being set by sales teams, but a lot of prices are also set by finance and possibly marketing teams. In retail businesses, we’ve seen prices set in merchandise by category managers, and even merchandise managers. But a handful of businesses do have an actual dedicated pricing function.
We need to state that realistically most companies, specifically smaller companies, probably won’t have a dedicated pricing function. And that’s perfectly fine. But when you’re starting on a journey of examining your pricing, you need to work out whether you’re doing a good or bad job. So, you must ask the questions to start with: Who sets the prices? It’s not always as easy and answers aren’t as you might expect.
To have a dedicated pricing function, you’re talking about a business with revenues over 100 million-plus. So yes, you’re right Aidan. If you’re a small business, you can’t invest in a pricing team. But you can invest in your understanding of pricing, educating yourself on some of the skills, and the tools that big businesses use. That is why we’re having this podcast for everybody.
To begin with, where are prices set in your company?
The next question is, why are they being set in that way?
And then a third question will be, are these people incentivised to do it correctly? Will this help the company? Are they confident and are they interested?
Those are deeper questions that will obviously require more thought. But just even asking the first question in your company, who sets the price, will start you off on the right path.
Often we’ve seen in businesses that do have a dedicated pricing function. But the real pricing manager may not be the pricing manager per see. Rather, it might be the sales manager or the finance director. Pricing does touch on a lot of disciplines. In fact, it crosses many different teams, and you kind of need a centralised hub of the pricing team. their job is to manage pricing, not control it but more of managing it. This way, everybody knows where they’re at and where they need to go.
I always think the mark of a good pricing manager is even not requiring that job description. But the person in charge of pricing has the need to work with other departments. That is key to understanding what the company does, the operations, the value provided to customers, who the customers are, and the teamwork with the marketing department.
There’s no point in launching a marketing campaign if you’re not tracking the dollars coming back. It’s someone who works with, whether there is a dedicated or shared resource among departments or whoever they report to. They need to be aware that there are so many stakeholders in the company that they have to work with and understand.
One of the best pricing managers aren’t just like spreadsheet technicians. They actually get out from behind their desk and work with stakeholders to improve skills, educate people on price, and listen to key challenges. They try to find practical solutions to businesses problems and connect different teams to the market.
I think we will end this podcast today with a question to you, the listeners – in your company, who sets the pricing?
There’s no right or wrong answer here if you haven’t got it. It does depend on the maturity of the business if you haven’t got a formalised pricing discipline or processes set. In this case, discretionary pricing is very commonplace, but you can take steps and learn new skills to improve that process no matter who you are.
LINKS MENTIONED IN TODAY’S EPISODE:
Get in touch with us on our website, Taylor Wells.
Join us on Episode 4 as we talk about cost-plus pricing.
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