Pricing – If it gets owned, it gets fixed… Well, maybe.

I have a confession to make. In the past, I have held the bias that accountability is the primary problem as to why we see so much bad pricing in industrial companies.  By bad, I mean proliferation of dangerous cost-plus pricing models, a lack of discipline with regards to controlling discounting.

After all, when everyone owns pricing, no one owns it. And because the products are complex, the competitor pricing lacks transparency, and we rely heavily upon engineering configurations there is such a focus on cost; it becomes even more likely that everyone has a view on the price needed to be profitable. The fight then ensues between those pushing for margins versus those trying to close the deals.

But in recent years I have come to the view that this alone is not the only reason pricing is not getting fixed. In companies where there is a pricing leader that reports to one of the C-Suite executives directly there still can be a lack of sustainable improvement.

So, what is going on here?  Are there that many incompetent pricing professionals out there?  

Let’s evaluate this. To get to the level of a director or above in the pricing field you must have a very refined set of skills. At a minimum these include a deep understanding of pricing, marketing, product management, project management, business intelligence/data analytic tools, cross-functional matrix leadership, and the ability to communicate well with your leadership team. While there may be a few individuals who can sell capabilities they do not possess, I have a hard time believing that this is typically the case.

So here is my assessment. There is a disconnect between the mandate given by the chief executive and what needs to be done by the pricing leader.

The CEO is ultimately measured on profit and margin performance. As pricing leaders, we know the drill: the next quarter’s targets must be met. And yes, we can often deliver the needed price increases in the short run. But too often this comes through resource burning, heroic sprint.  Quick wins are then plucked from the low-hanging fruit. The real challenge is different. Sustained enterprise value requires more than short bursts of effort. It demands the systems, tools, and processes that make value capture repeatable—and, most importantly, scalable. When we automate insights and embed them across the organization, we multiply our ability to deliver profit improvement. That takes time, but it’s the only way to move beyond one-off gains to lasting enterprise value growth.  

Further, the data and systems we are using are often items that are looked at as expenses to be cost controlled. These have often been last on the investment list. So, when the pricing leader comes asking for investments in IT systems and data cleaning, it does not resonate as a winning project. It looks like just more costs. Further, these are often an ask that means reprioritization of IT plans and budgets, putting us afoul of the CIO, the CFO, and possibly other C-Suite leaders who have invested months into planning to accomplish their goals. 

So, this disconnect means that it is likely that when CEOs agree to the pricing leader role, they do not fully comprehend the implications of what the role needs to do beyond applying good statistics and driving organizational alignment on those price points. Thus, the understanding that an investment in sustainable pricing processes, systems, and analytic support will need to follow to assure the ongoing success of the focus.

Having full ownership residing with the pricing leader is great. But alone, it means we are set up for only short-term wins or at best mixed results. So, this begs the question, do we need a seat at the table in the C-suite, do we need to do a better job of educating our senior executives and the board, or do we need to do both?  What do you think?