5 Steps to Establish a Successful Pricing Function

Inflation, competition, economic uncertainty. Welcome to today’s business landscape! To increase your chances of success, pricing must be a central element of your overall strategy. Key players in pricing, such as pricing managers and category managers, hold a vital role in protecting margins and maintaining profitability. But how can you effectively organize your pricing resources to align with specific business needs and accomplish goals?

Whether you're starting from scratch or optimizing the way your existing teams are organized, these steps can help you establish a successful pricing function:

1. Define pricing roles and responsibilities
2. Ensure you have the necessary pricing skill sets
3. Determine the right setup for your pricing function
4. Create a pricing decision-making process
5. Invest in the right pricing software

It’s time to explore how to organize your teams to ensure effective pricing.

1. Define pricing roles and responsibilities

Let’s take a step back and consider the role your teams are expected to play in pricing, both in broad terms and in specific responsibilities. As pricing is a crucial part of maintaining profitability, teams in charge of pricing must align the pricing strategy with corporate growth objectives. They are tasked with continually optimizing prices to meet revenue targets. This breaks down into specific responsibilities, including:

• Establishing pricing processes, encompassing annual and day-to-day pricing processes.
• Providing data-driven insights and pricing recommendations that your leadership team can rely on.
• Setting optimal prices for the entire product catalog while ensuring consistency.
• Managing promotional campaigns and flash sales to grow revenue.
• Optimizing prices to increase margins, based on market dynamics, competitor prices, seasonality, inventory, and customer demand.
• Providing pricing guidelines aligned with the overall strategy and product positioning.
• Implementing pricing policies and collaborating cross-functionally to ensure compliance and alignment across the organization.

2. Ensure you have the necessary pricing skill sets

Guided by the pricing roles and responsibilities, you can identify the necessary skill sets your business requires to effectively execute pricing. While the specific setup of your pricing function will be determined by your business needs, it’s important to consider these essential skills and identify any skills gaps.

• Strong analytical skills: Consider who should be in charge of gathering and interpreting data, conducting pricing analysis, and developing pricing models.
• Financial and numerical aptitude: This calls for a solid grasp of financial concepts, such as profit margins, pricing metrics, cost structures, and revenue forecasting.
• Expertise in pricing methodologies: Leverage these skills to develop your pricing strategy and implement processes.
• Business acumen: A deep understanding of the industry is required, including market dynamics, customer segmentation, and the competitive landscape.
• Project management: Your team will need these skills to ensure pricing projects are delivered on time and within budget.
• Communication skills: Enable cross-functional collaboration with sales, marketing, and finance to align pricing priorities with business objectives.

3. Determine the right setup for your pricing function

Let’s debunk a common myth before we continue. Based on steps one and two, you might think you need a large pricing function to be successful. But it all depends on your organization’s size, pricing maturity level, and what automation tools you have in place.

As you might expect, large enterprises usually have a larger pricing team while small to medium-sized companies have to make do with smaller teams.

Pricing maturity level also plays a part. For instance, companies with a high pricing maturity level typically have a dedicated pricing team. Businesses that are less mature in their pricing capabilities may not have a dedicated pricing team and instead rely on collaboration across departments. As is often the case, pricing can sit across many different teams including Category Management, Digital, Ecommerce, Marketing, Sales, and Finance.

Automation is another key factor. If a business has the right pricing automation tool in place, a smaller team can scale to do more.

4. Create a pricing decision-making process

Once you’ve decided on pricing responsibilities, you might assume the teams will simply make calculated and informed decisions. However, without a strategic process in place, they may make siloed decisions based on gut instinct. To establish an effective pricing decision process, you should take the following steps.

Implement pricing guidelines and policies

Create and implement pricing guidelines, discount policies, and approvals. Establishing pricing guidelines and discount eligibility maintains price integrity and prevents excessive discounting which can lead to margin leakage. Having clear criteria and thresholds that define when pricing decisions require approval enforces consistent decision-making and accountability. Ensure that all pricing policies are complied with across teams to mitigate inconsistent pricing practices which result in revenue loss and missed profitability targets.

Establish clear communication channels

Set up regular meetings, check-ins, and dedicated chat channels among key pricing stakeholders to facilitate effective price management and cross-functional collaboration. This helps avoid working in silos, tackles challenges, and aligns the pricing strategy with departmental goals.

Foster a data-driven pricing culture

Empower your pricing professionals and departmental stakeholders with access to pricing-related data, including historical prices, inventory data, customer data, and competitive intelligence to enable them to make contextualized decisions. A data-driven pricing culture leads to informed pricing decisions, improved profitability, and competitive advantage.

5. Invest in the right pricing software

The way you organize your pricing function is crucial. Managing large amounts of data, dynamically updating prices, and ensuring consistency across channels while adapting to market changes can be overwhelming, especially for smaller or less established teams.

Pricing software can be a lifeline by automating these manual tasks. It also allows teams to focus on more strategic tasks, including refining pricing strategies, differentiating prices based on customer segments, forecasting demand, and competitive analysis.

With Pricemoov’s next-generation pricing platform, you can tap into a comprehensive array of pricing capabilities to help your team scale and manage your prices more efficiently.

• Centralize your data and access real-time insights to make accurate and timely pricing decisions
• Manage all your prices in one place simply and efficiently
• Optimize your prices with powerful data science and end-to-end automation
• Deliver prices to any channel or system seamlessly
• Enable your sales team to win more deals with increased margins and reduced time to quote
• Monitor and analyze your pricing performance for continuous optimization
• Collaborate with all pricing stakeholders in your organization on a single platform

Ready to take your pricing to the next level?

The way you organize your teams to execute pricing has a strong impact on your bottom line. By following the steps of defining roles and responsibilities, identifying skills gaps, determining team size, creating processes, and embracing automation, you can build a successful pricing function.

At Pricemoov, we help businesses manage and optimize their prices to protect margins and drive revenue growth. Contact us today to unlock your revenue potential with intelligent pricing.