Pricing and Profitability Management: A Practical Guide for Business Leaders

Chapter 6

Achieving Effective Organizational Alignment and Governance

You're messing with a company's DNA when you change how you do prices.

—Richard Braun, VP of Corporate Strategic Pricing, Parker Hannifin Corporation¹

A global medical device manufacturer was taking two-to-three times as long as its competitors to get proposals out the door. Every time a new request for proposal (RFP) came in, the firm had to scramble to get input from Sales, Finance, Marketing, and Legal—each with its own agenda—to develop its pitch. At the strategic level, the device that was intended to be the firm's single most profitable product had target margins of 80 percent. But because the pricing process involved so many people and was so dysfunctional, sales representatives were cutting corners to close deals. The result? Massive revenue and margin leakage on virtually every transaction. Because contracts ranged from one-off sales to independent physicians (averaging $14,000) to huge deals with large medical groups (worth hundreds of thousands of dollars), this organizational disarray resulted in significant losses.

Unfortunately, this scenario is not uncommon. Most companies have their pricing stakeholders scattered throughout a variety of functions. But without establishing a companywide understanding of, and commitment to, their pricing strategies, businesses will suffer. Inevitably, they risk losing market share, foregoing opportunities for higher margins, or otherwise failing to respond adeptly ...