A frequent discussion in product management circles is: Who owns product prices at the time of sale? When Sales is negotiating a deal, and it’s time to look at making pricing adjustments, who makes, who owns, the decision?
Early on, before the first product ‘unit’ is ever sold, a price model is developed. This is a core function of product management and a component of the business model. Making 10 widgets costs $X, we’ll sell them for $Y, and $Z ($Y – $X) is our profit.
Things start to get muddled though. In the B2B (business-to-business) world, it is common for a company to sell another company a ‘solution.’ Solutions often are built using multiple components (e.g. distinct product offerings) to form the whole.
So, who owns the pricing? Sales, Product Management, or…
This is one of those times where there needs to be a bit of clarification around the particular definition of ‘product manager,’ within the respective organization. And, are we discussing B2C or B2B? My own comments are B2B oriented.
If the PM has No P&L Responsibility
Here, the PM is essentially in a ‘staff’ role. The person accountable for profitability (VP Sales? VP Product? ??) will accept or overrule the PM’s recommended pricing as necessary. This is frequently true in multi-component solution sales where an engagement manager is looking at a big picture and not just single-product focus.
If the PM Has P&L Responsibility
[pullquote align=”right”]Ultimately, the person accountable for revenue and profitability controls pricing.[/pullquote]In this case, the product manager is directly responsible for gross sales and profitability. Here, the PM simply must have input into the price negotiation. While it often happens, note that I am not encouraging the PM to directly become part of the sales process.
The PM develops the price model, as a component of their offering’s business plan. But the person accountable for revenue and profitability ultimately controls pricing.