What Makes A Great Pricing Manager?

There are nine commercial skills you need to master to be a good Pricing Manager, but there are ten soft skills you need to master to become a great pricing executive in any industry.  

Ability to identify and interpret value

A critical skill for a Pricing Manager in determining pricing strategies is identifying the value dimensions customers are willing to pay for. Value has traditionally been associated with product or service features and benefits; however, many other value dimensions, such as service levels, supply chain certainty, risk mitigation and redundancy, ensure a customer’s operations are secure. You can deliver substantial margin improvements by reverse engineering the value dimensions into a pricing strategy and price architecture. 

Develop an effective pricing strategy

Developing and publishing a company and product pricing strategy document is critical to identifying and interpreting value, and there are two crucial aspects to developing a pricing strategy. 

Determine market price positioning

The first is determining market price positioning by identifying whether you will serve the “budget”, “good”, “better”, “best”, or “ultra-premium” market segments. 

Revenue model mechanics

The second aspect of developing an effective pricing strategy is revenue model mechanics. Revenue model mechanics relates to the way customers pay for goods or services. This can be a simple invoice for goods or services or a monthly subscription on a user-pays basis. A Pricing Manager must also understand other revenue models mechanics, such as finance options, including leases for capital equipment and loyalty programs, such as club pricing and rebates.

Customer agreements

Customer agreements are another area a Pricing Manager can significantly impact. The customer agreement is the official documentation of value exchange. It needs to clearly articulate the scope of value delivered and the pricing or fees to be paid. A good customer agreement must be easy for the customer to read and understand. A confused mind does not buy or appreciate the value exchange. 

A customer agreement must contain the value to be delivered to the customer and the targeted spend, behaviours or actions the customer is expected to take in return for price discounts, service levels and performance rebates.

Management alignment

One of the most challenging aspects of pricing management in a company is gaining management alignment and buy-in to a specific strategy tactic or operation. Quite often, the executive leadership team may have a different perspective to the sales force, while marketing teams may have a different viewpoint altogether. Finance teams can often be involved with major contract signoffs but have no voice in protecting margins from excessive discounts or the payment of passive rebates.

A great Pricing Manager can bring together all cross-functional areas and, using empathy and listening skills, understand the objectives, constraints, and strategic imperatives necessary to develop the correct strategy and tactics supported by the appropriate operational capabilities. 

Achieving management alignment requires clarity around value and pricing strategy developed through an iterative engagement process with key stakeholders to build trust and buy-in.

Pricing team management skills

Every major Fortune 500 or listed company has now established an in-house pricing team. This team typically comprises a Pricing Manager with two to five analysts as direct reports. For larger companies with revenues greater than one billion dollars, a Pricing Director or Senior Vice President of Pricing will be supported by several Pricing Managers reporting directly to them. 

The pricing management team must commit to continuous training and integration with the rest of the business to become an effective in-house consultancy and advisory service. There is, however, a need for pricing teams to have some jurisdiction over decision-making and policy enforcement. To this end, clear delegations of authority need to be created and reviewed regularly.

The Pricing Manager must also be able to identify the level and mix of skills needed to deliver the right combination of pricing strategy advice and technical support to the business whilst ensuring their own employees have clear roles and responsibilities and are well-equipped to undertake appropriate research and identify business opportunities.

The ideal pricing team has a variety of senior executive management experience to drive strategy supported by skilled pricing analysts who can undertake SQL queries, use tools like Python to analyse large data sets and publish management reports that are clear and succinct using MS Excel and MS PowerPoint. 

One area pricing teams need to resource to manage appropriately is pricing administration. This includes master data updates, customer pricing changes and general system updates. Pricing administration should not be a direct responsibility of Pricing Analysts or Managers but rather should be the responsibility of a dedicated Pricing Administration Officer.

Many senior or highly talented executives can often be caught in a vicious cycle of attempting to guide and influence pricing strategy as their official roles and responsibility. However, there is also a high risk of becoming ineffective due to being swamped with pricing administration tasks. Pricing administration is critical for any business but must be adequately and appropriately resourced.

Sales, marketing, and negotiation skills

A Pricing Manager can directly impact revenue and profitability by guiding the sales, marketing, and negotiation efforts. Pricing Managers must understand the sales process and, ideally, have worked in frontline selling at some point in their careers or have met with customers to participate in sales negotiations. 

Understanding sales and negotiation dynamics and marketing and communication skills will allow Pricing Managers to navigate complex and sophisticated pricing challenges that confront sales teams daily. 

The optimal outcome for any business is to create a dynamic where the sales team engage daily with the pricing team to build more profitable pricing outcomes. This can be achieved organically by the pricing team delivering valuable insights and advice consistently to the sales team. It is also essential for the management team to sponsor and support the pricing and sales teams to work closely together. It must be stressed that cultural transformation can only occur with Executive Leadership Team and Board level sponsorship.

Analytics and methods  

Strong analytical skills are a core skill set for any pricing professional. The rise of unlimited data availability allows pricing teams to generate detailed data insights in virtual real-time to support strategic and tactical decision-making. In contrast, pricing teams often generate descriptive reports that are not acted upon or provide analysis that senior management does not understand or appreciate. 

A critical skill for any pricing professional is to identify the key metrics that can be used to make informed decisions and develop analysis tools that can support predicted if decision-making. Two examples that reflect this requirement to undertake specific analysis include price override discounts vs. gross margin by product customer and sales rep and regression modelling to identify price elasticity, not just of unit volume, but of gross margin dollars. 

The other side of data analysis is methods of price management. Methods relate to managing prices at a strategic, structural, and operational level. Many price management processes are in the heads of individuals. Pricing teams must document their approaches to price management and allow a pricing management manual to be published and distributed to pricing team members to ensure consistent performance and new recruits to fast-track induction to the business.

Systems and tools

Various data analytics systems, software, and tools are available to manage pricing analytics. A great Pricing Manager does not need to be fluent in programming languages or spend time manipulating data in Tableau or MS Excel; however, they must be able to direct analysts to undertake data queries, conclude from disparate data sets, and communicate insights and recommendations using these tools.

Here are some examples.

Tableau: Tableau is a data visualisation and business intelligence platform that enables Pricing Analysts to create interactive dashboards and reports to gain insights into pricing trends, sales performance, and customer behaviour.

R: R is a programming language and software environment for statistical computing and graphics. Pricing Analysts commonly use it to create predictive models and perform statistical analyses to optimise pricing strategies.

Python: Python is another programming language used for data analysis, machine learning, and statistical modelling. It can build pricing models, analyse data, and automate pricing decisions.

IBM Watson Studio: Watson Studio is an AI-powered platform that provides Pricing Analysts with data preparation, visualisation, and modelling tools. It can be used to create machine learning models for predicting pricing trends and identifying optimal pricing strategies.

SAS: SAS is a statistical software suite that offers a variety of tools for pricing analytics, including data exploration, predictive modelling, and optimisation. It can identify pricing opportunities, analyse customer behaviour, and simulate pricing scenarios.

Oracle E-Business Suite: Oracle E-Business Suite is an integrated suite of business applications that includes pricing analytics tools. It can manage pricing strategies, monitor trends, and optimise pricing decisions.

Microsoft Excel: Excel is spreadsheet software that can be used for pricing analytics by creating pricing models, analysing data, and running simulations to identify pricing strategies. It is often maligned for being two-dimensional and with limited flexibility; however, it offers a low-cost way to design a tool or create an analysis without the seven-figure expense associated with pricing software.

Many data analytics systems, software, and tools are available to manage pricing analytics. The choice of which one to use will depend on factors such as the size of the company, the data’s complexity, and the pricing team’s specific needs.

Pricing architecture

Price architecture refers to three key aspects of pricing management.

The first is the actual mechanics of pricing, and for many B2B businesses, this involves developing a national list price and customer discount matrix.

The second aspect is the intra-relativities of list prices between products within a range—for example, the list price relativities for a “good”, “better”, and “best” offer. For one product group, the “good” product may have a price index of 100, with the “better” product having a price index of 130 and the “best” product having a price index of 170. For another product group, these price indexes may be 100, 150 and 300, respectively. Ideally, these price relativities will be identified using value pricing principles. In truth, however, many list price architectures are developed using a simple cost-plus markup methodology with a flat percentage gross margin applied. This approach can cause products to become overpriced, thereby causing volume loss. Alternatively, products may be under-priced, causing margin loss.

The third level of price architecture relates to customer discounts. For many businesses, customer discounts are applied in a blanket approach across the entire list price, with customers falling into one of five price levels often named A, B, C, D & E. However, this blanket approach can be quite detrimental to profit optimisation. The ideal system is to create a unique discount per product group. Creating a price architecture also includes providing quantity order break discounts, rebates, tariffs, and surcharges for non-complying or bespoke customer orders. 

Pricing Managers must be across all aspects of price architecture to ensure revenue and margin integrity is maintained via consistent prices to market to minimise channel and customer conflict.

These nine pricing skills are critical for every Pricing Manager and team to master to build the appropriate pricing maturity level to drive profitable revenue growth. 

However, ten other transferable interpersonal skills of influence and persuasion are critical to master to create breakthrough outcomes and drive your career forward in pricing. 

1. Communication: Clearly and effectively communicating your ideas and thoughts to others is essential in business. This includes both verbal and nonverbal communication skills.

2. Emotional Intelligence: Understanding and managing your emotions and empathising with others are vital to building strong relationships and influencing others. This is critical to building deep respect and trust with sales teams. 

3. Active Listening: Listening carefully to others and showing that you understand their point of view is critical in gaining their trust and respect. 

4. Negotiation: Negotiating effectively and finding acceptable solutions is an essential skill for any pricing executive. Not every decision results in a win-win for both parties, but there is a need to negotiate a solution that each party can live with that serves the best outcome for the company and the customer. 

5. Storytelling: Using storytelling to convey your message and persuade others can be a powerful tool in business. Case examples and social proof are powerful ways to create change and build belief. Stories are scalable artefacts of culture, and when your colleagues become converts and start telling the stories on your behalf, influence is accelerated, and impact is amplified. 

6. Confidence: Confidence in yourself and your ideas can help persuade others and overcome objections. Confidence is derived from the level of conviction you have in your ideas. Conviction is generated by identifying a higher purpose or mission beyond the individual. 

7. Flexibility: Being flexible and adaptable to change is essential in business, as situations and circumstances can change quickly. Listening to others and letting go of beliefs that no longer work or are true is critical. The reality of business is that circumstances are constantly changing. We need to get ahead of the change or anticipate the change before we run out of options to address the change. 

8. Strategic Thinking: Thinking strategically and seeing the big picture can help persuade others and make informed decisions. This skill comes from having a passionate interest in the company’s operation and business model. Take time to study your company, your competitors, and your industry peers to help you build your strategic awareness. 

9. Relationship Building: Building solid relationships with people across your company can help you to influence and persuade them more effectively.

10. Trustworthiness: Being honest and trustworthy is essential in building strong relationships and gaining the trust of others. This means always acting in good faith. Never get waylaid by politics or underhand behaviours. 

As a Pricing Manager, you must master the nine key pricing skills and ten transferable interpersonal skills to become an indispensable asset for your organisation. With these tools, you’ll be able to confidently navigate any situation that arises while driving profitable revenue growth. Implementing these action steps into your daily workflow will ensure you have the knowledge and abilities needed for success.