Did you know your pricing function could be the secret weapon to driving sustainable growth and outperforming competitors? Israel Rodrigo, Business Consultant at Vendavo, explores the risks of overlooking it as a core competency and the actionable steps to build a world-class pricing function, maximize profitability, enhance customer relationships, and position your business for long-term success.
What Does the Pricing Function Do?
The pricing function is the linchpin of profitability, balancing short-term revenue goals with long-term strategic alignment. Pricing professionals are the unsung heroes of business strategy, mastering the intricate “alchemy” of blending market dynamics, operational costs, customer preferences, and competitive forces to create sustainable growth.
The 2025 Pricing for Profitable Growth Outlook from Vendavo and Experis surveyed more than 300 C-suites to help identify current trends in pricing, and respondents identified the top skills they keep in mind when recruiting for the pricing function:
A strong pricing function ensures every transaction supports the organization’s broader objectives while responding dynamically to market changes.
Here are the key responsibilities of the pricing function:
- Revenue and profit maximization
Pricing teams collaborate with sales and commercial teams to set pricing strategies that maximize growth while safeguarding margins. For example, implementing tiered incentives or value-based pricing models ensures products and services are priced to reflect their true market value and deliver a strong return.
- Process integration
Effective pricing is a bridge between strategy and execution. Pricing professionals ensure data, workflows, and processes are seamlessly integrated across departments. This allows real-time updates to pricing models and ensures alignment across sales, marketing, and operations.
- Market insights
As the organization’s “market thermometer,” pricing teams are tuned into what works and what doesn’t and how customers react to commercial policy changes. They provide critical feedback that shapes everything from product positioning, rebate & incentive program design to customer segmentation strategies, helping the company stay ahead of the competition.
Despite the strategic potential of the pricing function, many organizations still underestimate its value. Instead of empowering pricing teams as strategic contributors, they relegate them to transactional or administrative roles, missing opportunities to optimize across product development, sales planning, budgeting, and cost management.
The Cost of Overlooking a Strong Pricing Function
When pricing is treated as an afterthought or solely a support function, organizations risk falling behind more agile, strategically minded competitors. The consequences can be severe if you don’t bridge this gap:
- Misaligned pricing strategies
Relying on outdated or one-size-fits-all pricing models can lead to significant missed opportunities. For instance, failing to adjust for regional cost differences or varying customer willingness to pay can result in underpricing in some markets and overpricing in others.
- Reactive pricing decisions
Without a proactive approach, pricing decisions often occur too late to impact critical sales opportunities. For example, delayed adjustments to competitive pricing changes can mean losing deals or eroding market share.
- Inefficient processes
Poor integration between pricing systems and workflows leads to avoidable errors, such as inconsistent discounting or delays in generating accurate quotes. Over time, these inefficiencies can damage customer relationships and strain internal resources.
- Lack of market understanding
Without tools and processes to gather and analyze market intelligence, companies risk creating pricing strategies that fail to resonate with their target audience. For instance, pricing too aggressively in a cost-sensitive market can alienate customers, while being too conservative in a premium segment can leave revenue untapped.
- Missed profitability metrics
Metrics like price variation, win-loss analysis, and customer lifetime value offer powerful insights into what drives profitability. When these metrics go untracked, decision-makers operate in the dark, limiting the organization’s ability to optimize for growth.
- Limited cross-department influence
By excluding pricing professionals from strategic conversations – such as product development or budget planning – companies miss opportunities to create pricing strategies that align with broader business objectives.
- Customer relationship strain
Without consistent, well-thought-out pricing strategies, customer interactions can feel disconnected or arbitrary, leading to dissatisfaction and erosion of trust over time.
In short, a weak pricing function is a recipe for inefficiency, missed opportunities, and diminished market competitiveness.
Grab your copy of Vendavo and Experis’s 2025 Pricing for Profitable Growth Outlook
Building a World-Class Pricing Function
Transforming pricing into a strategic advantage requires hiring talented individuals as well as cultivating a culture, implementing robust processes, and equipping teams with the right tools. The 2025 Pricing for Profitable Growth Outlook found more than half (52%) of respondents (all with 500+ employees) say they rely on 11-20 people working on pricing, and 95% of respondents say they will recruit more pricing talent in 2025.
Here’s how to elevate your pricing function:
- Leverage data and technology
Modern pricing decisions are driven by data. Advanced tools like AI-powered analytics, predictive modeling, and real-time market insights enable pricing teams to act with precision and agility. For example, dynamic pricing software can adjust rates based on changing supply and demand conditions, ensuring competitive yet profitable prices.
- Cultivate multifaceted expertise
Pricing professionals wear many hats but are hard to come by. They are part data scientist, part financial analyst, and part business strategist. Beyond technical skills, they must understand sales dynamics, system architecture, and how to craft compelling value propositions that resonate with customers.
- Invest in internal talent
Internal promotions often yield the best results, as employees already familiar with your organization can quickly adapt to new pricing roles. Look for team members who are data-savvy, curious, and eager to learn—they’ll be instrumental in refining your pricing strategy over time.
- Elevate pricing as a strategic core competency
Pricing should be as integral to your business strategy as R&D, supply chain management, or marketing. By embedding pricing into decision-making processes, companies can align strategies with real-time market needs. For example, including pricing professionals in product launch planning ensures new offerings are positioned for maximum profitability.
- Build a strong framework
A robust pricing framework provides the foundation for success. This includes tools for measuring customer value, profitability, and market trends. Remember, pricing is not a “set it and forget it” function. Frameworks must be flexible enough to adapt to new market disruptions, business models, and regulatory changes.
- Adopt a growth mindset
Like any transformative initiative, optimizing pricing requires commitment and perseverance. Start small – perhaps with one product line or market segment – and scale efforts as your team gains confidence. Regular training, investment in new methodologies, and a focus on continuous improvement will yield long-term results.
Why Pricing Excellence Matters
A world-class pricing function isn’t just a nice-to-have. It’s a critical driver of competitive advantage. Companies that invest in pricing as a strategic core competency are better positioned to:
- Adapt to market volatility
Dynamic pricing strategies help organizations stay competitive even in unpredictable conditions.
- Maximize profitability
By capturing untapped revenue opportunities and preventing margin leakage, companies achieve sustainable growth.
- Enhance customer relationships
Consistent and fair pricing fosters trust, loyalty, and long-term customer satisfaction.
- Drive cross-department synergies
Integrating pricing into broader business strategies aligns goals across sales, marketing, and operations.
Pricing is a back-office function and a strategic lever for driving profitability and competitive differentiation. Organizations that prioritize pricing excellence gain an edge, unlocking sustainable growth and new opportunities.
The first step is to build a strong foundation: hire or promote skilled professionals, invest in advanced tools, and embed pricing into core business processes. As markets evolve and competition intensifies, those who embrace pricing as a strategic priority will emerge as industry leaders.
Watch the webinar of Vendavo and Experis’s 2025 Pricing for Profitable Growth Outlook
How Vendavo Can Help
Vendavo has been powering the profit transformations of global manufacturers and distributors for more than 25 years. A successful profit transformation requires unified pricing, selling, and rebate management – and that’s what Vendavo does best.
Ready to start your profit transformation with AI-powered solutions you can trust? Reach out today to request a demo or speak with an expert about your business needs.