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Change Management, Part 2: The Importance of Internal Alignment on Pricing

Jared Smith< Jared Smith February 16, 2021

In my last post, I talked about the importance of change management. Now let’s get a little more granular on the importance of internal alignment in pricing, which can certainly be a worthy change for many organizations. Exactly what is pricing alignment? Well, here’s a scenario.  

Say you’re working in a distribution sector where prices change only a few times a year. This twice a year event is often a result of years of tradition within that particular industry and is known as a market standard. Your customers expect it to happen and anything outside of that norm is considered odd, if not bad, form.

So your team that’s in charge of pricing goes through the process of incorporating strategy, targets, market information, past history, and a slew of other things to produce prices that are delivered to your salespeople for one of these pricing events. When this exercise is complete, a few things can happen. Let’s take a look at the two that happen most frequently.

1. Producing Pricing Without Consulting Sales

The first is what I see happening most of the time, and unfortunately, it’s also the worse of the two scenarios. Your Pricing team produces prices that they feel are right on target. So they pump those prices out to the field with very little advanced notice and socialization, with the expectation that Sales will use them without question. What usually happens is that Sales fights back.

Once they finally decipher the pricing that they have had very little time to digest, they begin finding holes and exceptions and in turn create headwinds that cause the Pricing team to rework the pricing, and equally as bad, fight fire after fire to correct small, isolated cases that consume a lot of time.

Sales is not happy, and if they have been given only a little bit of time to digest, it is likely they are experiencing a whole new level of pain rooted in the fact they have had no time to preview it to their customers before the pricing becomes effective. The whole pricing cycle feels rushed, frustration sets in, Pricing can get overwhelmed, and overall trust in the process suffers. Again, this happens more than I like to see.

2. Obtaining Pricing Alignment First

The second scenario paints a different picture. Pricing develops the prices, and instead of pushing them out immediately, they downshift the gears a bit and they take the time to socialize and align with Sales on the pricing they are suggesting.

They spend ample time with their Sales counterparts providing examples from the data as to ‘why’ the price is what it is, and they ultimately come to an agreement before the price is published. This time for this pricing alignment process varies by organization and industry, and one thing is certain: every customer we have worked with that has employed it agrees that it is one of the most important steps to effective sales execution.

When the two internal partners agree on the price, the resistance from Sales fades, the fires flare up less often, and as an organization you all head in the same direction. Pricing becomes a topic of value and achievement, as opposed to causing continual internal debate on whether it is right or wrong.

How Acceleration Builds Proper Pricing Alignment

Improving the process of internal pricing alignment can be supported first and foremost by delivering pricing output faster and more accurately, supported by solutions that allow you to optimize pricing and improve your speed-to-quote performance.

With them, you will be able to deliver pricing to Sales quickly during a pricing cycle so they have time to digest and work with the pricing team to agree on the prices that are going out into the market. With greater speed, Sales will also be able to deliver prices to their customers in a timely fashion – something that they will definitely appreciate.

Second, understanding how to effectively manage the internal pricing alignment process in a systematic way is something the best solutions partners should have years of experience in. The right ones can help you develop and facilitate this key critical step so you can spend more time on creating and capturing value, and productively pursuing commercial transformation and excellence.

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