B2B companies are facing several economic uncertainties, including inflation, decrease of volumes, and increasing pricing pressure, which makes having an effective pricing team more imperative than ever.
How to build an effective pricing team
When it comes to building an effective pricing team, there are many aspects to consider. These can be allocated to three key dimensions: Purpose, place, and people.
The requirement to have a clear purpose addresses two questions: how centralized should the pricing team be, and what responsibilities should it be given? The combination of both questions results in four different archetypes:
Finding the right approach requires a structural assessment of the business dynamics at play. For example, a volatile, transactional business with a relatively homogenous portfolio will benefit from a team that has decision-making capabilities and can move quickly.
The second important question is about place: Should the pricing team report into finance, or sales, or a product team? Simon-Kucher’s Global Pricing Study showed there’s a pretty even distribution of functional homes across B2B organizations.
The central question for making a pricing team effective is not “who does it report to?”, but rather “how does it support and interact with other functional teams?” It’s the pricing team’s responsibility to create healthy tension that enables consistency and effectiveness across the rest of the business.
The last critical element is people: How much dedication to the role is required? What should be their key capabilities? And what is the right team size?
The first two questions are answered again by the archetypes: The more responsibility and centralization of the pricing team, the more dedication and expertise is needed.
With regards to the optimal size of the pricing team, business leaders can use one very high-level rule of thumb: about 40-200 million euros in revenue per FTE. With an increasing team size, …
- …the more responsibilities are allocated to it,
- …the more deals per year the company closes,
- …the more complex the deals are, and
- …the larger the deals are on average.
What success looks like
An effective pricing team is crucial to succeed in the current challenging landscape. Getting started will look different depending on where you are in your pricing journey, but the result will be an effective pricing team that improves your return on sales significantly.