In large companies with annual revenues in the billions, pricing is often a critical driver of profitability and competitive advantage. A 2019 study of the global Fortune 500 companies reveals that 22% of these firms have a dedicated and centralized pricing team. For the rest of them, pricing is managed by other functions. The approach to managing pricing can vary significantly across organizations. In some cases, pricing responsibilities are distributed across multiple functions, such as sales, marketing, finance, and product management, rather than being managed within a dedicated pricing team. While this distributed approach might seem practical or inevitable in complex organizations, it often creates significant risks and inefficiencies that can have a measurable financial impact.
Lack of Coordination Undermines Strategy
When pricing is distributed across various functions, there is often a lack of coordination and a unified strategy. Each department may approach pricing decisions and actions based on its own objectives, which can result in conflicting priorities. For example, sales teams may prioritize discounts to close deals, marketing may focus on competitive positioning, and finance may emphasize margin protection. Without a dedicated central pricing function to aligning these objectives, the organization risks inconsistent pricing practices that confuse customers and weaken overall profitability.
The absence of a cohesive strategy also means the company may struggle to respond effectively to market changes. Pricing decisions made in silos are often reactive, with little consideration of long-term implications or alignment with broader business goals. This lack of foresight can erode margins and market positioning over time, particularly in competitive industries where pricing is a critical differentiator.
Inconsistent Pricing Leads to Poor Customer Experiences
One of the most significant risks of distributed pricing is the inconsistency it creates in customer experience. When pricing decisions are made independently across different functions or regions, customers may encounter varying prices for the same product or service. This is often called “the Turkish Bazaar.” This inconsistency can damage trust, particularly in a world where customers have greater access to pricing information and expect transparency.
For large companies with complex customer relationships, inconsistent pricing can also lead to conflicts in contract negotiations or disputes over agreed-upon terms potentially generating an avalanche of pricing-related credit notes. These issues not only strain customer relationships but also result in higher administrative costs as teams scramble to resolve discrepancies. Over time, the damage to customer trust can lead to lost business, especially if competitors offer more predictable and transparent pricing.
Margin Erosion from Over-Discounting
Distributed pricing often leads to an over-reliance on discounts, particularly when sales teams are given significant autonomy in pricing decisions. Without clear guidance or controls, sales representatives may resort to discounts as a default tactic to close deals, even in situations where customers would have been willing to pay full price. This practice erodes margins and sets a precedent for customers to expect lower prices, making it harder to maintain profitability in the future.
Additionally, without centralized oversight, companies may fail to optimize their pricing based on market conditions, customer segments, or product value. For example, high-value customers or premium products may not be priced appropriately, leaving revenue on the table. In industries with thin margins, even small pricing inefficiencies can result in millions of dollars in lost profits annually.
Disjointed Data and Technology Usage
In today’s business environment, effective pricing requires robust data analytics and technology. However, when pricing responsibilities are distributed, it becomes challenging to aggregate and leverage data effectively. Each function may use its own tools and methodologies, leading to fragmented insights and missed opportunities to optimize pricing.
A centralized pricing function can harness advanced analytics and technologies, such as price optimization software, analyzing customer behavior, market trends, and competitive dynamics. Without this centralization, large companies are often unable to take full advantage of these capabilities, leaving them at a disadvantage compared to competitors with more integrated pricing strategies.
Compliance and Governance Risks
Distributed pricing can also create risks related to compliance and governance. In industries with strict regulatory requirements, such as healthcare or financial services, inconsistent pricing practices can lead to legal exposure. Even in less-regulated industries, a lack of standardized pricing policies increases the likelihood of errors, such as offering unauthorized discounts or failing to honor contractual agreements. These mistakes can result in financial penalties, reputational damage, or costly legal disputes.
A dedicated pricing function provides the structure and traceability needed to enforce pricing policies and ensure compliance across the organization. Without it, companies may struggle to maintain accountability and transparency in their pricing decisions.
Quantifying the Financial Impact
The financial impact of distributed pricing in a large organization can be substantial. When pricing inefficiencies, inconsistent practices, and over-discounting are compounded across thousands of transactions, the costs add up quickly. For a company generating over $1 billion in annual revenue, even a 1% improvement in pricing can result in millions of dollars in additional profit. Conversely, a 1% decline in pricing effectiveness due to distributed decision-making can have an equally significant negative impact.
For example, if a company with $1 billion in revenue operates at a 10% profit margin, losing 1% of margin due to pricing inefficiencies would equate to $10 million in lost profit annually. In many cases, the actual impact is even greater when considering factors such as lost revenue opportunities, higher administrative costs, and diminished customer loyalty.
Why Centralized Pricing Is the Path Forward
To address these challenges, many large organizations are moving toward structured and managed pricing models. A dedicated pricing function provides a single point of accountability for pricing decisions, ensuring alignment with corporate strategy and consistency across all customer interactions. It also allows companies to leverage advanced analytics, enforce standardized policies, and respond more effectively to market changes.
By organizing pricing, companies can improve margins, enhance customer trust, and reduce the risks associated with compliance and governance. While this transition may require upfront investment in technology, training, and organizational change, the long-term benefits often far outweigh the costs.
Conclusion: Why Pricing Strategy Can’t Be Scattered
Distributed pricing may seem like a practical solution in large, complex organizations, but it often creates significant risks and inefficiencies that can erode profitability and customer trust. The lack of coordination, inconsistent practices, and over-reliance on discounting associated with this approach can result in millions of dollars in lost profit for companies generating billions in sales revenue. By moving toward a centralized pricing model, organizations can establish a unified strategy, leverage data and technology more effectively, and build stronger customer relationships. In a competitive market, the ability to manage pricing strategically is not just an operational advantage, it’s a critical driver of financial performance.
Struggling with scattered pricing strategies? Contact us today to learn how centralized pricing can unlock margin, consistency, and control.
Stephan Liozu, Ph.D., Chief Value Officer at Zilliant, is a global expert in pricing, innovation, and value management with 20+ years of experience. He has authored 15+ books, including Pricing—The New CEO Imperative (2021) and Value-Based Pricing (2024)
