Pricing and Profitability Management: A Practical Guide for Business Leaders

Five Key Components for Aligning a Pricing Organization

Various factors can prevent an organization from operating effectively, but the most serious problems arise when the following factors are involved.

• Roles have not been adequately defined. A surprising number of businesses fail to determine which departments and individuals contribute to setting, executing, and monitoring prices, undermining a potential reorganization from the start.
• Pricing lacks clout. The value of functional areas such as Finance, Marketing, and Sales is widely recognized, but Pricing still struggles to get internal recognition and the authority that comes with it.
• Communication between stakeholders is poor. Individuals and departments that belong to the pricing organization may not be kept abreast of corporate objectives or important shifts in strategy.
• Decision making is fragmented. Coordination is critical between the often disparate members of the pricing organization. Unless the right mechanisms are put in place, execution may be inconsistent across product lines and distribution channels.
• Agreement cannot be reached on profitability metrics. Without consensus on how to calculate profitability, an organization likely won't be able to determine whether it is actually making money on specific customers, which threatens the very viability of its business model.
• No clear lines of authority have been established. Decentralized organizations—particularly those such as pricing, with cross-functional boundaries—suffer ...