Who’s responsibility is it to set prices?
Have you ever wondered who should be involved in the price strategy conversation?
Of course, you as the business owner should be involved.
But, should your sales team help?
What about your accountant?
You're in the right place...keep reading to learn who should be included in the process and what perspective they bring to the conversation.
Growing a profitable company is a team sport, so consider how the price affects everyone on the team.
If the price is too high, the sales team may have a hard time closing the sale leading to lower sales, profit and cash. Plus, you may experience high turnover in the sales department.
Prices that are too low overload the system leading to employee burnout, poor quality and lower profit. Everyone is busy but there’s nothing to show for the hard work.
That’s why it’s important to find the sweet spot and charge the right price.
The price is more than just a number on a proposal. Setting the right price requires a balanced approach where every angle is considered – goals, marketing, sales, operations and financial.
We definitely need to start with you, the business owner. You set the tone and direction for the pricing process.
- Remind everyone of the company’s mission and core values
- Share the company’s growth plans
- Increase market share – temporary charge a lower price
- Increase profitability – higher price while maintaining high quality service
- New revenue stream that supports other services
The marketing team leader is often focused on how the price will affect their ability to
- Create messaging to help the company stand out from the crowd
- Generate high quality leads
- Stay within budget
The sales team leader comes to the table with the perspective of maintaining their ability to
- Present the price
- Close the sale
- Meet sales goal
The leader of the operations team balances the pricing conversation by being mindful of
- A realistic scope of work
- Delivering quality service on time within budget
- Without employee burnout
Finance team brings the ability to
- Analyze the historical data and risk
- Determine the reality of hidden costs like mistakes, scope creep and discounts
- Make it right with the customer
- Prepare projections to confirm the price supports the company’s financial goals
- What if we bundle two services with a 5% discount, how does that affect profitability, cash flow, sales commissions, operations?
Danger of One Department Setting the Price
The problem with relying on one department to set the price is each department has a natural bias that may not be great for the company long term.
- The marketing team is usually neutral when it comes to setting the price. This department is more interested in mapping out the customer journey and the value the company.
¯ The sales team prefers the price lower. They want to close more sales and believe a lower price will help.
↗ The operations team would like the price a little higher to provide a cushion so there’s less pressure and need to micromanage every single detail.
The finance team will recommend a higher price because they see all of the costs, loan payments, inflation, and risk.
? Owners often feel pulled in every direction. One minute you want to charge more to accomplish your financial goals…but not too high, I don’t want to lose customers. The next minute “let’s increase our prices because our costs are rising…but wait a minute, I don’t want to break the company.
The danger of relying on the owner is the price is usually set in the middle range during the price meeting. Then, the real-world hits and they start second guessing themselves leading to giving discounts.
Balanced Approach
Relying on one department to set the price is dangerous, but look at how blending all of the departments naturally creates a balanced approach.
Even if your company does not have a separate marketing, sales or finance department, it’s important to consider the viewpoint to help you set the right price.
Bottom line
All perspectives are required to set the right price.
When all departments are represented, you’re more likely to
- Create buy-in from all employees
- Reduce tension between departments
- Generate profitable sales
- Improve customer experience
The right price creates a win-win-win for everyone – company, customer and employees.
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