PRICING STRATEGY
Module 6 – Price & Strategy Implementation within the Firm
Midterm Examination
EMBEDDING STRATEGIC PRICING IN THE
ORGANIZATION
● Many organizations struggle to
implement and maintain pricing
strategies and these are the reason why:
○ Pricing may “come off the tracks”
and there is often no clear ownership
of and responsibility for pricing
outcomes.
○ Conflicted motivation of decision
makers
○ Inconsistent application of pricing
strategies
● Organization covers the entire structure
of the pricing function.
● Motivation involves using principles, data,
and analytics, and performance metrics
and incentives that encourage the right
behaviors by both the organization and
the individual.
THE FOUNDATION FOR PRICING STRATEGY
IMPLEMENTATION
ORGANIZING
● Organizations must create a small pricing
committee within each business unit that
were tasked with managing pricing
policies and execution.
● Organization must form a
corporate-supported pricing council
composed of representatives from the
pricing committees at the business units.
ORGANIZATIONAL STRUCTURE
● Designing an organizational structure for
the pricing function involves establishing
formal reporting relationships for the
managers responsible for managing the
pricing process.
● The expert resource role can be
effective with a centralized pricing
function supporting multiple divisions
where each unit operates in distinct
markets.
★ Functional coordinator - is asked to take
control of the pricing processes.
★ Commercial partner - role when it is
given authority over both pricing
decisions and processes.
★ Figurehead - occurs when the pricing
organization owns the right to make key
decisions but does not have the power to
enforce those decisions in the market
place.
ROLE FOR PRICING FUNCTION
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 PRICING STRUCTURE
★ Center of scale – which pricing decisions
are made and managed at the corporate
level.
★ Center of Expertise - characterized by
the business units maintaining control of
the pricing decisions and pricing
processes.
★ Dedicated Support Unit - business unit
has a dedicated pricing group that is only
loosely aligned with corporate pricing (if
that function even exists).
DECISION RIGHTS
● Formal structure is not the only
consideration when organizing for
pricing.
● Failure to formally allocate pricing
decision rights leads to more inconsistent
pricing and greater conflict as managers
attempt to influence pricing decisions.
★ Input rights - enable an individual to
provide information before the decision is
made.
★ Make rights - belong to only one person
or committee.
★ Ratification rights - provide a
mechanism for senior managers to
overturn pricing decisions when they
conflict with broader organizational
priorities.
★ Notification rights - allocated to
individuals that will use or be affected by
the pricing decisions in other
decision-making processes.
TYPES OF DECISION RIGHTS
PRICING PROCESS
● Ineffective pricing processes:
○ Frequent deviations from agreed
price schedules and unclear pricing
authority
○ Frequent non-standard customer
requests
○ A large number of uncollected
charges and an increased number of
write-offs
○ Excessive unearned discounts and
waived upcharge
○ Increased pricing errors
○ Increased order processing and
fulfillment errors
● Pricing process:
○ Define Major Pricing Activities
○ Map Current Processes
○ Identify Profit Leaks
○ Redesign Process
CUSTOMER ANALYTICS
★ Customer analytics is the use of data to
understand the composition, needs and
satisfaction of the customer.
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PERFORMANCE TREND ANALYSIS