In your company, who handles pricing, Sales or PM?
I'd say it's a Sales thing, but what do you think?
Good Answers (2)
PM, definitely. It is their job in the long term of the product to ensure the integrity of the brand and price, and the salesperson is just looking for the sale. PM looks at long term, most salespeople look at short term.
Giving the sales team a set of prices, whether quantity driven, or advertising driven, makes sense, so they can speak intelligently without looking like they need to "check with someone else".
In my experience as a product manager, this has to be a collaboration for it to work. Giving sales full control of pricing is like letting the fox guard the proverbial hen house.
Don't get me wrong, sales input is essential, and one of the key drivers for pricing, but you have to balance that input with competitive comparisons, peer positioning and sound business case analysis. On the other hand, having a PM be the sole decision risks creating pricing that is out of touch with market conditions.
In the perfect scenario:
1. PM creates pricing based on thorough research and business case analysis
2. PM works with sales to gut check pricing
3. PM adjusts pricing based on feedback from sales (as needed)
4. After rollout - PM stays close to sales to gauge market reaction, and adapt as needed.
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Steve D
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If you give it to sales you enable them to adapt quickly to market needs, but you'll probably see profitability decline in the long run. Also, much less consistency, which can lead to serious problems.
Giving it to product management ensures more consistency, probably more rationality (not always, sales people do like to keep things simple) and more accountability. All at some expense to agility.
In most markets, I think the agility issue is very small and everyone will be happier with PM doing it.
However, often the task of setting pricing is confused with the task of managing/approving discounts.
Pricing can involve a heck of a lot more than just determining what someone pays for a product. The structure of options, how profit is divided amongst the various pieces of complex products, and how quantities and other commercial issues come into play need a broad view. This is what product management can provide.
In markets where decisions need to be made quickly to react to market needs, a smart product manager will develop sensible policies/guidelines to educate sales on how much leeway they have, and how that leeway affects their commission and the profitability of the company.
Clarification added 1 month ago:
I almost forgot: If product management is responsible for profitability of the product line, they must have control over both pricing and costs (through features, specs, etc.) Otherwise you will see unprofitable products, and high product manager turnover.
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The CEO, who overseas Sales & Marketing team
Ramesh
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In my company, our process works just like Scott has documented. We also have a process in place so that pricing can be adjusted on a per customer basis.
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Product Management people get quotes based on cost to make the part with a 15% profit margin, then before this goes to the customer, it is reviewed by management that is above both engineering and sales and other areas.
The sales and marketing people do not know the details that go into cost of making the product, and sourcing the raw materials.
You cannot leave pricing to sales. Sales will always price everything so the company does not make money, since 95% of all sales people get compensated on revenue and not profit. They really don't care what anything sells for as long as they get the sale. For them to not get the sale is lost revenue for them - since any dollar (even $1) is one they wouldn't have gotten before.
We have a specific pricing department that reports through to the same person who handles Product Management.
As well intentioned as the sales force is they are not the people to manage pricing from a strategic level.
Generally product management set a list price, however, sales then adjusts the pricing to the market conditions and specific project.
