A lot of B2B pricing groups say they’re frustrated. They’re frustrated by how others in the organization view them. They’re frustrated by how they’re treated, how late they’re included, how little respect they receive, and how often they’re expected to clean up pricing messes they had no hand in creating in the first place.
All of that frustration is certainly understandable.
After all, pricing is still treated like an administrative support function in many companies. Need a discount approved? Ask Pricing. Need a price list updated? Ask Pricing. Need a one-off quote, a margin calculation, a competitive price check, an exception rerouted, or some last-minute justification for a number Sales has already promised to the customer? No worries…just dump it on Pricing…that’s what they’re there for, right?
But here’s the Dutch Uncle talk that might be hard to hear:
The pricing function isn’t just being defined and pigeonholed in this way by others. In too many cases, this is also how the pricing team views itself.
Granted, this has gotten a lot better over the last decade. More pricing groups now recognize that they can and should be much more than analysts, approvers, spreadsheet jockeys, price-list administrators, and the unearned discount police. And I’d like to think that we here at the PricingBrew Journal have had at least a little something to do with the progress.
That said…the identity crisis persists.
There are still too many pricing groups waiting for someone else in the company to urge them to pursue more strategic endeavors. They’re waiting for the mandate to expand their scope and broaden their purview. They’re waiting for the executive team to recognize and appreciate their full potential. And they’re waiting for the rest of the organization to stop treating them like a reactionary support function and start treating them like a strategic partner.
That’s a whole lot of waiting…for something that rarely shows up on its own.
A key reason pricing is ideally positioned to be a more strategic contributor is because it sits at the intersection of value creation, value communication, and value capture.
Most people in the organization will only see one piece of that equation. Product teams will focus on creating better offerings. Marketing will focus on positioning and communicating those offerings. Sales will focus on winning customers and closing deals. Finance will focus on margins, profitability, and overall financial performance.
But pricing can see how all of these pieces come together…or don’t…whatever the case may be.
This broader perspective is a big deal because pricing performance is never shaped by the number alone. It’s shaped by what the company creates, how the offering is packaged, which customers are targeted, how value is communicated, how alternatives are positioned, how sellers negotiate, and how consistently the strategy is executed in the marketplace.
When the company fails to create enough differentiated value, communicate that value effectively, or protect it during the sales process, the pricing problem everyone sees at the end is often just the final symptom.
Leveraging this perspective, pricing is also in an ideal position to diagnose the root causes behind weak price realization and recommend more systemic solutions.
Most people in the organization will treat the symptoms rather than the true root causes. They’ll see excessive discounting, weak margins, inconsistent prices, customer pushback, poor realization on price increases, or underperforming products, and they’ll jump to the easiest or most obvious explanations…
Salespeople just need to hold the line. Managers just need to enforce the policies. These customers are simply too price sensitive. Those competitors are just bad actors. Everyone just needs another reminder that discounts are bad.
Sometimes these explanations are right. But most often, they’re just convenient. And convenient explanations will rarely address the real underlying root causes. So the symptoms just come back, again and again.
Because pricing can see the broader commercial system, it’s uniquely suited to push past the obvious and expedient explanations. It can determine whether the real issue is weak differentiation, poor segmentation, ineffective value messaging, bad offer design, unrealistic targets, flawed incentives, inadequate sales guidance, weak negotiation capabilities, or something else entirely.
Pricing can then recommend solutions that address the actual source of the problem rather than simply creating another approval rule, dashboard, or policy that attempts to treat the symptoms after the damage has already been done.
Another reason pricing is ideally positioned to be more strategic is that pricing performance speaks to far more than just the deals at hand.
Stellar pricing performance is highly correlated to strategic advantage. It often indicates that the company has created valuable offerings, differentiated itself from the alternatives, targeted the right customers, and built real competitive advantages.
Weak pricing performance can be equally revealing. Persistent discounting, poor realization, and margin pressure often signals weak competitive differentiation, poor prospect targeting, deteriorating market position, and/or investments in offerings where the company lacks meaningful advantages.
As a result, relative pricing performance can help inform broader planning decisions. It can provide useful signals about where to invest in product development, which customers and segments Sales and Marketing should prioritize, which markets are most attractive, and where the company’s strategic position may be weaker than the leadership team realizes.
The bottom line is that a B2B pricing function…for many more reasons than I’ve covered in this article…does indeed have the potential to be a much more strategic contributor. And as a more strategic contributor, pricing can indeed expect to command more respect, more inclusion, and more influence.
But here’s the thing: the team needs to see itself in this way first.
After all, when the pricing team itself doesn’t really believe in or recognize its own strategic potential and value, how is it a surprise to anyone that the rest of the organization will struggle to see it, too?
From Tactical to Strategic Pricing
Some teams are so mired in tactical grunt work and daily firefights that they never make progress on strategic pursuits. How have other pricing teams transitioned into more strategic functions? What steps did they take?
Crucial B2B Pricing Concepts
Pricing in a B2B environment is very different from pricing in consumer or retail settings. In this on-demand webinar, you'll learn about 12 ways B2B pricing is unique and 6 core pricing concepts that every B2B pricing person needs to understand inside and out.
Aligning Pricing to Business Strategy
How do you ensure that your pricing and the overall business strategy are properly aligned? And what should you do when there's a disconnect?
