The process of pricing products correctly is vital to a company’s bottom line. Yet price-setting is not always a high priority, nor is it the specific responsibility of a single department within a company. This phenomenon can be observed across industries, ranging from health care and consumer goods to telecom and finance. Marketing is sometimes in charge of pricing, while in other cases finance assumes the task. When a company does not have a defined pricing strategy, as is often the case, no one is accountable for pricing decisions.
Published on Insights Associations, our VP Price and Portfolio Management, Oskar and Ben discussed three major reasons why marketing and marketing research should take ownership of the last P of marketing.
The Fourth P: Why marketing should own pricing
“The four Ps of marketing are familiar: product, place, promotion and price. Marketing’s ownership of, or at least involvement with, the first three is a common arrangement, but pricing is not ordinarily included. This may be because the first three seem to be more appropriate tasks for a person with a creative marketing background, while price is considered a quantitative issue, more suitable for someone who enjoys analyzing spreadsheets.
This view may explain why finance is so often the default choice to make decisions about pricing. However, if a pricing strategy is to make sense, it must work for consumers or they will stop buying the product. If this happens, it will not matter if a price satisfies a theoretical profit model. Decisions about any of the four Ps should always be focused on consumers. There are three major reasons why marketing and marketing research should take ownership of the last P of marketing:
- Market research understands the state of the market, particularly in terms of communication with consumers
- Building on the first point, retail sales are moving online, and the online environment is subject to much faster change than traditional brick and mortar
- Control of pricing will turn marketing into a profit center
Marketers have a unique position within the organization, and their perspective is a critical element in informed pricing decisions. Among other contributions, marketers can help brands avoid making these common strategic errors…”
Read the rest of the article on Insights Associations.