Friday, April 1, 2011

The role of sales, product, and pricing - can't we all just get along?

Many of us in pricing are tasked with what some may view as an unenviable responsibility: somehow get two distinct, separate roles to coordinate and execute on a strategy (commonly given by your management) that those roles might see in conflict with their own management's strategy.  In other words, "ignore them, listen to us!".
OK, it may not be that bleak of a picture, but it sometimes feels like it.  This is one of the reasons I 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.  And 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 where in the organization pricing is discussed.  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 of pricing without prices that are already set or without prices that are being 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 I was involved in almost 5 years ago.  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 and price 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 simply did not want to cooperate; it was that the Sales VP had a different vision of what his team was responsible for.  In addition, the Sales VP reported to a separate Chief Sales Officer, and therefore incentive programs were completely disparate.  Time and time again, Pricing and Product struggled to set and keep prices at a certain level.  Many times, they resulted to playing games within their own organization: setting prices unusually higher, knowing sales would discount.  While this may have lead to some reasonable price levels, it built distrust between Pricing and Sales… not a good working environment.
Unfortunately, by the time I stopped working with this client, the situation had not changed.  However, I have since heard that an organizational change resulted in more cooperation between the three groups, resulting in more profitability and a better working environment.
Regardless of what happened at that client, it does not have to take an organizational shift to create change.  Pricing may have an unenviable task, but a powerful one.  By working closely with Product and Sales, soliciting input, and helping define and demonstrate the “what’s in it for you” (WIIFY) for each group, many pricing teams have helped drive increase profitability for the enterprise… something all groups should share in.
I am interested to hear from others… what have your experiences been with “changing the pricing culture”?  What has it taken along the lines of organizational, policy, practice, or other change?

1 comment:

  1. Great comment from Steven Forth on LinkedIn:
    "I agree that we need to work to change cultures so that there is alignment between product management (feature nerds), pricing (the sales prevention department), marketing (those people that can't close) and sales (the margin destruction department), to use the disparaging terms by which we often refer to each other. In some company cultures this tension is seen as something positive, a set of checks and balances that generates creative tension. But more often it just creates gridlock and frustration. In my experience the best way to get alignment is by moving the company to a value centered approach to its business. This means actively managing the cycle of creating, communicating and capturing value. In the future, this may be the key role of what is now the pricing leadership."

    I love the "disparaging terms" portion, as this truly illustrates how even the little disconnect between groups can sabotage any strategy, especially one as emotional as pricing.