THE STRATEGY AND TACTICS OF PRICING by Zale Joseph & Nagle Thomas & Hogan John

Author:Zale, Joseph & Nagle, Thomas & Hogan, John [Hogan, John]
Language: eng
Format: epub
Publisher: Prentice Hall
Published: 2011-06-14T14:00:00+00:00

Decision Rights

Formal structure is not the only consideration when organizing for a pricing; it is also necessary to allocate decision rights to managers both within and outside of the pricing function that will participate in the pricing process. Allocating decision rights ensures that each participant understands their role and the constraints on what they can and cannot do with respect to pricing. Failure to formally allocate pricing decision rights leads to more inconsistent pricing and greater conflict as managers attempt to influence pricing decisions. A business services company unwittingly ran into this problem when they created a Key Account team and gave them the right to make “strategic” discount decisions directly with the company’s largest customers. Unfortunately, the traditional sales force never had their own decision rights for pricing adjustments reduced and continued to provide their own price quotes to these same customers. Large accounts started to receive multiple prices for purchase and began to actively solicit additional quotes in hopes of getting a better deal. Although large accounts grew considerably under the key account program, average selling prices declined rapidly, along with profitability.

Exhibit 8-4 Types of Decision Rights

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