The Six Things a Real Pricing System Has to Do

In my last post, I suggested that before anyone sits through a demo, you write a one-page job description for your pricing system: the decisions it has to support, who makes them, and what “good” looks like in plain, testable terms.

When teams take a first pass at that page, it tends to come back short. Two lines show up almost every time: “one place where all the prices live” and “better visibility into margin.” Both belong on the page. They’re also the two jobs the spreadsheet fails at most visibly, which is why they’re the easy ones to name. The rest of the page is harder to write, because the other jobs are things the spreadsheet never really attempted, and it’s hard to miss something you’ve never had.

So this piece puts some structure around that page. Across the manufacturers and distributors we work with, the same six jobs keep coming up for a real pricing system (a “pricing system of record,” if you like the formal term). If you read the “Excel Hell” piece before the summer break, you’ll remember a list of five capabilities. Four of the jobs below are those same ideas, regrouped a bit. Two are new, and I’ll point them out when we get there.

For each one I’ve added a sample line for your job description, written the way we talked about in the last piece, so you can test any option against it.

The six jobs

1. Keep one record of every commercial term

List prices, customer-specific prices, discounts, special pricing agreements, rebate terms, freight rules. At most mid-sized manufacturers and distributors these live in four or five places: the ERP, the folder, a stack of contract PDFs, a rebate spreadsheet in finance, and somebody’s inbox. None of those places is required to agree with the others, so they usually don’t. The first job of a pricing system is to be the one place where they do.

Sample line: “When a price changes at 9 a.m., everyone who quotes, invoices, or pays a rebate against it sees the same number by 9:05, without anyone forwarding a file.”

2. Show where margin is leaking while there’s still time to act

This is the price waterfall doing its day job: pocket price and pocket margin at the transaction level, with rebates, freight, and payment terms netted out. Most companies find their leakage the same way, which is a disappointing quarter followed by a three-day workbook build. By then the quarter is already in the books.

Sample line: “Finance and sales can see pocket price and pocket margin by customer and SKU on any day of the month, without pulling an analyst off something else for a week.”

3. See a cost change coming and show what it touches

This is the first of the new ones. Most pricing tools are built around price and treat cost as a field somebody updates. The two companies I mentioned in the last piece would tell you cost is where their pain actually starts: a supplier letter arrives, and a week or two goes by before the new prices reach the field and the website. A real pricing system treats a cost change as an event. It should be able to tell you which SKUs are affected, which customers buy them, which open quotes and agreements are exposed, and what the exposure is worth at today’s prices. (We covered the strategy side of this in the cost shocks piece back in May.)

Sample line: “When a supplier increase or a tariff change is announced, we know the same day which prices, quotes, and agreements are exposed and what that exposure is worth.”

4. Turn the analysis into a recommended action

This is the second new one, and it’s the gap I pointed at in the last piece when I said a dashboard is read-only by design. A chart showing that pocket margin slipped in a segment is useful. A specific recommendation is far more useful: adjust these SKUs for this customer segment by this much, here’s the expected impact, and here’s the evidence behind it. A person still makes the call, of course. The system’s job is to do the legwork so the pricing meeting starts from a short list of decisions instead of a stack of charts or a large dataset.

Sample line: “Every pricing review starts from a list of specific recommended actions, each with a dollar estimate and the data behind it.”

5. Make sure the price you promised is the price the customer gets

A quote, a contract, an invoice, and a rebate check are four separate documents at most companies. The “Excel Hell” piece called this ‘direct integration with the quote moment,’ and that’s still the heart of it. The rep sees Target, Stretch, and Floor (or whatever your terms of choice are) in the screen where they quote, and can’t go outside policy without a visible flag and an approval path. I’d now take it further downstream. The special pricing agreement should expire when it’s supposed to, and the rebate should be calculated from the same terms the customer signed.

Sample line: “A rep sees target, stretch, and floor where they quote, and what we quoted matches what we invoice and what we pay out in rebates.”

6. Trace every number back to its source

For every price change, that means who made it, when, why, and who approved it. For every calculated number (a pocket margin, a recommendation from job 4), it means being able to walk back to the transactions underneath it. This is probably the most underrated of the six, because nobody notices an audit trail until somebody asks for one. It’s also the job that decides whether your CFO trusts the other five, and finance won’t sign off on a black box.

Sample line: “For any price, discount, or recommendation, we can show who changed it, when, why, who approved it, and what data it came from, in minutes.”

Why the two new ones get forgotten

Jobs 3 and 4 are the ones companies most often forget to ask for until they’ve already signed a contract, and I think there’s a simple reason. Demos are very good at showing jobs 1, 2, and 5. A clean price list, a nice waterfall chart, and a quote screen with guardrails all look great in a 45-minute meeting. Responding to a cost change and producing a recommendation are harder to show, because they depend on your data and your situation, so they tend to come up six months after go-live, when the first supplier letter arrives and somebody asks, “Okay, so what do we do?”

It’s also worth noticing that the six build on each other, roughly in the order listed. You can’t find the leak without the record. You can’t size a cost change without knowing pocket margin by customer and SKU. A recommendation nobody can trace back to its source won’t survive the first tough question from finance. That doesn’t mean you have to stand up all six at once (most companies shouldn’t try). It does mean the order you tackle them in matters, and a system that skips the early jobs will struggle with the later ones.

Where to start tomorrow

The homework from the last piece was to pull the five most recent pricing decisions that went sideways and trace where each one broke. Take that same list and tag each failure to one of the six jobs. A quote that went out at the wrong price is probably job 1 or job 5. The margin miss nobody could explain is job 2, and the cost increase that took two weeks to reach the website is job 3.

Most companies find their failures pile up under one or two jobs. Those go at the top of the job description, with the sample lines above rewritten in your own numbers and your own language. The jobs with no tags still belong on the page; they just don’t need to be first.

Over the coming weeks, I’ll take these one at a time, starting with the first: one record, and why pricing, discounts, rebates, and contracts so rarely agree with each other.

Revomo is built around these six jobs. If you’re working through a job description for your own pricing system and would like a second set of eyes on it, we’d be glad to compare notes. The first look is on us.