Pricing governance in practice
Nearly everything touches pricing and pricing touches everything: sales, marketing, finance, product management, operations, IT, etc. Hence it can be hard for companies to find the right balance to define clear rules regarding pricing related decisions:
- Who decides on price lists, discounts and exceptions to pricing?
- What is the role of Pricing in the organisation (“advisor to the business” versus “gatekeeper”)?
- Which commercial flexibility is allowed for Sales?
Especially for dominant players, it might be even more important to define the right set of rules. Because of the different legal constraints, one pricing mistake could have a considerable impact on the company’s profitability and reputation in the market.
A good example is Wanadoo that got fined for €10m by the European Commission in 2003 for predatory pricing. Wanadoo was deliberately setting prices on broadband products at lower than cost. Appropriate processes and procedures need to be put in place to ensure that this risk is well managed, without jeopardizing the company’s agility (e.g. commercial flexibility, speed of price and quote decisions).