Pricing: setting, holding and enforcing prices, from the catalogue price list to the margin actually earned.
Pricing builds the price lists, frames discounts and checks that the planned margin is the one that reaches the accounts. It works at the crossroads of costs, competition and commercial negotiations. Its analyses are still often done in large spreadsheets, fed by hand from the ERP.
The role
The guardian of price consistency across products, channels, countries and customers.
The pricing manager sets selling prices from costs, positioning and the market, then frames what sales reps may grant. They prepare price increases, measure their effect and follow the price waterfall, from catalogue price to net invoiced price. In a mid-sized company, the function is often held by a small team, reporting to sales management, marketing or management control.
Day to day
A typical day.
- MorningCheck the prices applied the day before: sales below the floor price, off-grid discounts, price list errors.
- MorningReview sales reps’ requests for price exceptions for a customer or a deal.
- MiddayTrack competitor prices and public prices observed online and in store.
- AfternoonUpdate cost prices and simulate their effect on margins.
- AfternoonPrepare the next price grid or a targeted increase with sales management.
- End of dayAnalyse margin by customer, by item and by channel, and flag drifts.
The objectives
What the role is measured on.
- Gross margin and net margin
- Average net price achieved
- Variance to price list
- Price exceptions granted
- Price consistency across channels and countries
- Actual take-up of price increases
Indicators are named, never quantified: levels depend on each company, and the diagnostic measures them.
Day to day
The problems that come up most.
Price lists in several systems
ERP, e-commerce site, catalogues, files sent to customers: a price update is propagated by hand, with omissions.
An opaque price waterfall
Between price list, on-invoice discounts, back margins and cost to serve, a customer’s real net price is hard to rebuild.
Exceptions with no trail
Special discounts are negotiated by e-mail or phone, and no one knows any more why a given customer has a given price.
Costs moving faster than prices
Materials, energy, transport, exchange rates: costs change, price lists follow late and the margin erodes without warning.
Competition tracked by hand
Recording competitor prices online and in store takes time, and the records age quickly.
Decisions with no measured effect
An increase or a promotion is rarely assessed afterwards: volumes, mix, customers lost.
By sector
One role, several realities.
- Fashion and luxury
Price consistency across countries and currencies, gaps to watch to limit the grey market, wholesale and boutique prices, price increases decided by collection.
- Retail
In-store and online prices, markdowns and sales, prices by zone or store format, positioning against direct competitors.
- Cosmetics and beauty
Recommended retail prices by channel, gift sets and limited editions, distributor price lists, promotions and strikethrough prices to frame.
- B2B distribution and wholesale
Customer-specific prices across a very large number of references, discounts by family, the resale-at-a-loss threshold, passing on supplier increases.
- Industry
Prices set from the industrial cost price, raw-material indexation clauses, spare-part price lists, prices for made-to-order quotes.
What changes
Automate the task, keep the judgement.
What gets automated
- Price list updates propagated from a single source to the ERP, the e-commerce site and customer files, with validity dates.
- Calculation of the price waterfall and net margin by customer and by item, by a reporting tool fed by the ERP.
- Exception circuit: sales rep’s request, automatic margin check, logged approval.
- Competitor prices published online, collected and then matched to internal references by an AI agent.
- Alerts on sales below the floor price, off-grid discounts and drifting margins.
What stays human
- Pricing policy and brand positioning.
- Trade-offs between volume, margin and the customer relationship.
- Significant exceptions and the decision to raise prices.
Use cases
How to automate, case by case.
Each case starts from a question leadership teams ask. The starting point, what gets automated, the tools involved, and what stays in the teams’ hands.
How do you automate price list updates?
- Today
- At each price increase, pricing prepares the new grid in a spreadsheet, then sales administration or IT imports it into the ERP, and someone updates the e-commerce site and catalogues separately. Omissions and date mismatches create gaps between what is announced and what is invoiced.
- What gets automated
- The validated grid is loaded once into a single source, with its effective date, then propagated to the ERP, the website, the sales reps’ app and customer files. Checks run before the switch: item with no price, unexpected decrease, price below cost. After the effective date, a check verifies that orders and invoices do carry the new prices.
- What stays human
- Pricing and sales management validate the grid and its effective date.
- ERP
- Product information management (PIM)
- E-commerce site
- Reporting tool (BI)
How do you automate the calculation of industrial cost price to set selling prices?
- Today
- Industrial cost price is calculated from bills of materials, routings, material costs and hourly rates, often in a spreadsheet kept by management control. It is rarely updated, and pricing sets its prices on costs that are no longer current.
- What gets automated
- Cost price is recalculated from ERP data: bills of materials, routings, latest purchase prices, hourly rates and overheads according to the company’s method. Each significant variation is flagged with its cause: material, labour or subcontracting. Pricing immediately sees the items whose margin falls below the set threshold.
- What stays human
- Management control validates the costing method; pricing decides whether to pass it on in prices.
- ERP
- Costing tool
- Reporting tool (BI)
How do you automate competitor price monitoring?
- Today
- Competitor price checks are done by hand, on a few websites and in store, and recorded in a spreadsheet. They cover a small part of the range and age quickly.
- What gets automated
- Prices published online by competitors and resellers are collected regularly, in line with the websites’ terms of use. An AI agent matches competitor products to internal references, even when the descriptions differ. Price gaps, promotions and changes are presented by family, with alerts on significant movements.
- What stays human
- Pricing validates uncertain matches and decides whether or not to align.
- Price monitoring tool
- AI agent
- Reporting tool (BI)
- Item master
Can price elasticity analysis be automated?
- Today
- The effect of a price change on volumes is estimated by intuition, or by a rough before-and-after comparison. Promotions, seasonality and stock-outs blur the picture, and the analysis is rarely redone.
- What gets automated
- A statistical model estimates, by family or by reference, the sensitivity of sales to price from history, isolating seasonality, promotions and stock-outs. It is recalculated as sales come in and states its level of confidence. Pricing uses it to simulate an increase or a decrease; where history is too short, the tool says so.
- What stays human
- Pricing judges the reliability of the estimate and weighs it against the positioning intended for the brand.
- Statistical model
- Reporting tool (BI)
- ERP
- Till data
How do you automate the calculation of net margin by customer?
- Today
- The invoiced price is known, but a customer’s net margin also depends on back margins, trade cooperation, carriage costs, returns and payment terms. These elements live in different tools, and the price waterfall is rebuilt once a year, if at all.
- What gets automated
- A reporting tool assembles each customer’s price waterfall, from catalogue price to net-net price: on-invoice discounts, year-end rebates, cooperation, logistics costs and cost to serve allocated according to rules set with management control. Net margin is displayed by customer, by item and by channel. Customers whose real margin departs from the target margin are flagged.
- What stays human
- Pricing and sales management decide on actions for low-margin customers.
- Reporting tool (BI)
- ERP
- Accounting software
- Transport management system (TMS)
How do you automate the approval of price exceptions requested by sales reps?
- Today
- A sales rep needs a special price to win a deal; they get it by e-mail or phone, then sales administration enters it in the ERP. Afterwards no one can find who granted what, or for how long, and the exceptional price becomes the usual one.
- What gets automated
- The request is made in a form connected to the CRM and the ERP, which immediately shows the resulting margin, the customer’s history and the prices granted to comparable customers. Depending on thresholds set by management, the exception is granted automatically, submitted to pricing or escalated to sales management. The validated price enters the ERP with its end date, and an alert precedes its expiry.
- What stays human
- Pricing or sales management grants exceptions above the thresholds and owns the decision.
- CRM
- ERP
- Workflow tool
- Reporting tool (BI)
How do you automate passing raw-material cost increases on to price lists?
- Today
- When materials, energy or transport rise, pricing has to estimate the effect on each item, decide whether to pass it on and prepare the announcement to customers. The calculation is done family by family, by hand, and the price change arrives well after the cost increase.
- What gets automated
- Tracked indices and purchase prices are linked to bills of materials: the tool calculates for each item the exposed share of cost and the effect of a variation. For customers whose contract includes an indexation clause, the new price is calculated using the contract formula. Pricing gets a proposed increase by item and by customer, ready to be simulated and validated.
- What stays human
- Pricing and sales management decide on the size and timing of the increase.
- ERP
- Costing tool
- Reporting tool (BI)
- Document management system
How do you automate checking price consistency across countries and channels?
- Today
- A brand sells in its boutiques, online, to department stores and to distributors in several countries, each with its own price list and currency. Excessive gaps feed the grey market and customers’ comparisons, but no one sees them at a glance.
- What gets automated
- Price lists for all countries and channels are gathered and converted into a reference currency, with taxes and costs taken into account according to the set rules. The tool compares each reference with the brand’s pricing policy and flags gaps outside the corridor, as well as prices observed at online resellers. Alignment proposals are prepared for the next grid.
- What stays human
- Pricing and brand management set the price corridor and decide on alignments.
- ERP
- Reporting tool (BI)
- Price monitoring tool
- E-commerce site
How do you automate the calculation of markdowns and sale prices?
- Today
- At the end of the season, markdowns are decided reference by reference in a spreadsheet, from remaining stock and the teams’ intuition. Some come too early, others too late, and leftover stock remains heavy.
- What gets automated
- The tool calculates for each reference and each store the remaining stock cover, the sales pace and the observed price sensitivity. It proposes a markdown level and timing according to the set objectives: sell-through, margin, leftover stock. Validated prices are sent to the tills, the e-commerce site and shelf labels, and the result is tracked day by day.
- What stays human
- The sales and merchandising teams choose the markdown strategy and validate the prices.
- ERP
- Till software
- E-commerce site
- Reporting tool (BI)
How do you automate the simulation of a new price grid?
- Today
- Before a new grid, management wants to know what it will bring in and which customers it will affect most. The simulation is done in a large spreadsheet, on last year’s sales, and each assumption means recalculating everything.
- What gets automated
- The proposed grid is applied to actual volumes for the chosen period, customer by customer and item by item, with the discounts in force. The tool shows the effect on revenue and margin, the customers most affected and the items whose position against competitors changes. Several scenarios can be compared side by side.
- What stays human
- Sales management chooses the scenario and prepares the announcement to the customers most affected.
- Reporting tool (BI)
- ERP
- Simulation tool
Questions from the teams
What teams look to improve.
- Which tools are needed to manage prices in a mid-sized company?
- To start with, the ERP that holds the price lists and a reporting tool that calculates margins and variances are often enough. Depending on needs, competitor price monitoring and an approval circuit for exceptions are added. A dedicated pricing software is justified when the number of references, customers and channels makes these tools too heavy.
- Should price lists be held in the ERP or in a separate tool?
- Reference price lists and invoiced prices stay in the ERP, which invoices. Grid preparation, simulations and checks can live in a separate tool, provided the validated grid is loaded into the ERP automatically and with a trail, not copied.
- Can AI set prices?
- It can propose: estimate price sensitivity, detect an anomaly, match competitor products, simulate a grid. The pricing decision commits the brand, the customer relationship and compliance with competition law: it stays with the pricing team and management.
- How do you avoid selling below the floor price?
- First set a floor price by item or by family, calculated from cost price and the minimum target margin. An automatic check blocks or flags any quote or order line that falls below it, and the exception follows an approval circuit. A regular report lists the sales concerned and who made them.
- How do you measure the effect of a price increase after it is applied?
- Compare volumes, net price achieved and margin before and after, by customer and by family, taking seasonality into account. The tracking also shows how far the increase was actually applied, since it may have been renegotiated or delayed by exception. Pricing draws the lessons for the next increase.
- How do you check the resale-at-a-loss threshold on promotional prices?
- In France, the threshold is calculated from the effective purchase price defined by the Commercial Code, which takes into account financial benefits granted by the supplier, taxes and transport. An automatic check compares each promotional price with this threshold before it goes live and flags the lines in breach. Interpreting borderline cases remains with the in-house lawyer.
- How do you make in-store and website prices reliable?
- By distributing prices from a single source to the till, shelf labels and the website, with the same effective date. A check compares published prices with the source every day and flags discrepancies, particularly strikethrough prices and promotions whose period has ended.
- How do you frame price reduction announcements and strikethrough prices?
- Regulations require the reference price of a price reduction announcement to be justified, in principle the lowest price applied over the previous thirty days. The tool keeps the price history by reference and by channel, calculates this reference price and blocks an announcement that does not respect it. Special cases are validated with the in-house lawyer.
02 — Getting started
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