If your company is intent on preserving - and growing - profit margins, it becomes imperative to adapt and up your game plan. Pricing and profitability management needs to be a key element of that plan. Everywhere you look there seems to be a conspiracy to put pressure on your profit margins - more competitors than ever before, sophisticated procurement departments and slow economic growth have all been factors in contributing to this pressure cooker environment.
From supermarkets to selling cars, the role of pricing is to please the board and/or business owners while not deterring customers. How is this achieved? Commercial imperatives notwithstanding, it is crucial for brand equity that your pricing and positioning in the market must appear logical and fair in order for it to be successful.
Do you have a dedicated Pricing Manager to advise and guide you to a more profitable business? If not, perhaps it's time you thought about employing this strategic member of your staff. They might just prove to be the lever for growth that you were missing. Employing an expert professional in this field, driven by a more strategic approach to pricing – and better execution – could translate into a substantial enhancement of your firm's profitability.
A pricing manager determines pricing schemes for a company’s products and services. This includes coordinating with production departments to learn how much these offerings cost to make and provide, as well as working with staff in the marketing and sales departments on appropriate campaigns and promotions.
As companies prepare to roll out new products and services, the pricing manager evaluates them to set policies on pricing. These include the base price as well as discounts that may be extended to specific retail partners and dealers. As an example, phone companies often provide discounts on their handsets when they are purchased with a phone plan. The pricing manager needs to decide on the appropriate pricing for plans, as well as the level of discount to offer on individual phones to appeal to customers.
Should you wish to employ a Pricing Manager, let's briefly run through his/her main duties:
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Manage total pricing procedures, enhance processes to make the most of efficiencies and ensure timely response to new market conditions.
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Lead and direct pricing strategy formulation and take appropriate action on pricing to enhance profitability.
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Define new business procedures, evaluate resource requirements and stimulate implementation or maintenance of pricing system.
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Perform partnering with purchasing buyers, product managers and sales department to ensure integrated plus profit maximizing approach to the market.
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Assist in pricing negotiations with customers
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Manage and supervise pricing analysts to support activities inclusive of new price generation and discrepancy resolution etc.
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Ensure integrity and accuracy in pricing at all times
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Perform financial evaluation to assess pricing actions effectiveness.
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Maintain and update regularly pricing history database.
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Analyze financial impact of price approach in view of overall history as well as profitability of customer.
Pricing managers consider the costs of production, including not just the actual manufacturing but also marketing, shipping, handling, and related expenses. They want to make sure correct pricing helps the company to earn a profit - unless a product is specifically designated as a loss leader.
A good Pricing Manager will:
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Investigate ways to get more value
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Understand how value is created and delivered. He/she will clearly link offerings with the benefits that are delivered to customers - and set prices to capture a share of that value.
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Improve analytical capabilities.
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Develop a “pricing dashboard”to detect margin leakages, respond more quickly to pricing opportunities, and execute the pricing strategy more consistently.
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Develop a clear perspective on which products, customers, salespeople, or channel partners create the most value and which customers and products erode value.
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Build pricing optimization capabilities.
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Assess price and promotional changes in a structured manner, bringing rigour to determine “what needs to be true” for a price move to succeed.
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Create structured, repeatable,and supported pricing processes.
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Focus on processes that will create sustained performance.
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Invest for the long haul, which should include installing recognised pricing software. BlackCurve brings together your price management, quotations and analytics into a single integrated platform.
Can you afford not to employ a dedicated Pricing Manager? Building pricing into a strategic capability is a major source of gaining a competitive advantage but requires new skills, data, and tools, as well as a sustained organizational focus on margin management. By employing a pricing manager you will elevate pricing within your organisation and make margin management a more visible part of your executive agenda.
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The ultimate to-do list in the first 100 days of your pricing job
Sources
- Pricing for Profit: how to develop a powerful pricing strategy for your business, Peter Hill 2013.
- The Strategy and Tactics of Pricing, Thomas Nagle and John Hogan 2010.
- http://www2.deloitte.com/us/en/pages/strategy/solutions/pricing-and-profitability-management-services.html
- http://www.wisegeek.com/what-does-a-pricing-manager-do.htm
- https://abranddayout.wordpress.com/2010/07/23/the-duties-of-the-pricing-manager-ethics-or-profits/
- http://www.greatsampleresume.com/Job-Responsibilities/Pricing-Manager-Responsibilities.html
- Pricing with Confidence: 10 ways to stop leaving money on the table, Reed K Holden and Mark Burton, 2014.