Who does pricing? A key role of management is getting the right people doing the right things at the right time, but who are the people doing pricing? Who should be engaged in informing, developing, and implementing pricing decisions? How should executives structure the decision-making team? And what decisions should senior executives retain control over while pushing other decisions down into the organization?
When a firm adopts value-based pricing, it is also adopting a different decision-making approach to pricing. Pricing decisions made in one department can no longer simply be handed off to another department for execution. Rather, pricing decision-making itself becomes a cross-functional activity.
To demonstrate the cross-functional nature of pricing decisions, consider that value-based pricing relies on understanding the perceptions of value from the customer’s orientation while ensuring that value can be delivered profitably. The full understanding and knowledge of customers’ perceptions and the firm’s costs is dispersed throughout different functional areas of a firm. As such, making good value-based pricing decisions requires gathering these inputs from these functional areas across the organization.
Or, consider that acting on pricing decisions usually requires passing information across functional departments and having that decision implemented by a functional area that may not be under the direct control of the department ...