Centralized programs ensure profitable decisions.
Whether a company grows through a strong M&A engine or has a culture of independent sellers, developing a centralized pricing function is often one of the last steps organizations consider. Still, it represents a tremendous profit lever for the business.
Decentralized pricing often looks like sellers making their own pricing decisions that may fall outside of business objectives. Providing latitude to commercial teams is important; however, a lack of centralized structure can lead to:
- Unwarranted customer discounts that can result in entitlements
- Pricing that is aligned with gut feelings and customer requests, not market factors
- Efforts to win sales and grow volume at the expense of margin
- Regional or product-specific promotional efforts that don’t support business growth goals
- Sales turnover due to limited support and clear guidelines
- Institutional knowledge that lives in a few tenured sellers
Best-in-class pricing organizations utilize centralized pricing programs to ensure everyone in the commercial organization is making profitable decisions toward common goals. Example programs include:
- Centralized pricing algorithms made available to sellers with clear and practical reasoning
- Front-end tools and visualizations that provide price recommendations, approval workflows, and decision support where sales latitude is preferred
- Data management that delivers consistent reporting and clearly answers critical questions
- Defined roles and responsibilities across the organization
- Processes that uphold your pricing goals
Common Challenges
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Pricing Inconsistency
Decentralized pricing enables commercial teams to set or communicate customer pricing outside of established policies or expectations. This results in large variations of invoiced prices that don’t correlate to value drivers, segmentation, margin expectations, or business goals.
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Limited Visibility
Your business may have disparate systems or pricing rules across regions, acquisitions, or organizational functions that make it difficult to aggregate data sources and can result in complex accounting or limited ability to measure financial performance accurately.
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Price Leaks
Decentralized pricing policies lead to in-the-moment pricing decisions regulated only by individual sales reps. This results in discounting, fees, freight, and other pricing elements getting overlooked in the overall cost to serve.
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Lack of Organizational Structure
Who has the authority to make pricing decisions such as price setting discount thresholds, and quote approvals? Businesses need to establish clear rules of engagement, processes the team can easily follow, and roles that are responsible for ongoing pricing and commercial excellence.
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Workflow Gaps
Multiple or complicated systems and tools for sales teams to use—ERPs, CRMs, CPQs, price management apps, Excel-based files—results in sales not logging into appropriate systems, leveraging functionality, or using recommended pricing.
Meet Our Experts
With over 250 dedicated pricing strategy experts, our team helps businesses achieve profit and EBITDA growth through our process proven on over 800 engagements since our founding in 2006.