It’s not unusual for B2B companies that are just getting started on their pricing journey to ask for our perspectives on where the pricing function should be organizationally located. And sometimes, companies going through some sort of major transformation will take the opportunity to re-evaluate their past decisions to see if a change might be in order.
Of course, the question is not an easy one to answer. In fact, even attempting to put forth a single “right” answer would be irresponsible, as every situation is different due the various organizational structures and personalities involved.
For example, it’s not uncommon for the pricing function to be located within whichever group or department initially champions the need for greater pricing capabilities. This type of decision is largely driven by who wants to do it, rather than who should be doing it.
So…is this bad?
On the one hand, it could certainly be argued that a group that actually wants to take on pricing is likely to be more engaged than a group that’s forced to take on pricing. But on the other hand, one could also make the case that because organizational dynamics play such a massive role in effective B2B pricing, attitude and enthusiasm alone won’t be able to overcome certain organizational barriers and hurdles.
In our research, we’ve found that dedicated pricing functions are typically located in one of four organizational locations or reporting structures:
- Sales or Sales Operations Group
- Marketing or Product Management Team
- Finance or Accounting Organization
- Reporting Directly to the CEO or COO
Of course, none of these organizational locations or reporting structures is entirely ideal or perfect—each has its own strengths and weaknesses, pros and cons, etc.
While we can’t say that there’s one “right” answer, we can say that companies shouldn’t be making knee-jerk decisions based on who wants to do it, or default decisions based on where some other company has located their pricing function.
Rather, business leaders should carefully consider the pros and cons that others have experienced in each location to make a thoughtful and deliberate decision based on their company’s unique attitudes, aptitudes, and organizational dynamics.
Where Should the Pricing Function Be Located?
Should Pricing report directly to the CEO? Should it be located in Sales, Marketing, Product, or Finance? While none of these organizational locations is perfect, through our research, we've been able to identify and document some of the common pros and cons associated with each location.