Who Prices? The Survey Says …
Annually, Pragmatic Institute surveys the market and this year, I was allowed to study the data.
The data I used was from the 842 respondents who completed the survey. Since Pragmatic Institute targets product teams, you can consider that’s the population from which this data is drawn.
In the analysis below, the dependent variable I used was the answer to the question: “Which of the following business activities are your responsibility? Check all that apply.” I specifically analyzed the results to one of the possible responses: “Setting and maintaining pricing.” In essence, we are about to look at what characteristics of product people are different between those who price and those who don’t.
Experience – Product people with more experience are more likely to have pricing responsibility. Specifically, the dramatic cutoff was at about 6 years of experience. 31% of respondents with 5 or less years of product experience set or maintained prices, while 43% of those with 6 years or more had that responsibility.
Age is correlated with experience, but not perfectly. The age group with the most pricing responsibility, 37%, was 35-54. Over 54 and the number dropped to 25%. Under 35 and the number was only 19%.
Technical ability is a good predictor of pricing role. Respondents self reported as either highly technical, somewhat technical or not technical. In order, these groups had pricing responsibilities of 42%, 37% and 32%. The more technical, the more likely someone prices.
Profitability – 67% of those who said they are responsible for the profitability of their product also claimed to set or maintain prices. This contrasts with only 24% of those who aren’t responsible for profitability. Although this feels right, I feel sorry for the 33% of people who have responsibility for profits without any pricing authority.
Type of product – 57% of hardware product people have pricing responsibility. Followed by 41% of professional services product people, then 38% of software and 37% of cloud services product people. Although there is no additional evidence supporting this claim, it appears the higher the variable costs, the more likely the product people manage prices.
Hours worked per week is also an indicator of pricing role. 49% of people who work more than 50 hours per week have pricing responsibility while 29% of those who work 40-49 hours per week set or maintain prices.
Time spent in strategic roles is another predictor. 49% of those who spend more than 50% of their time in a strategic role do pricing while only 39% of the rest do.
Department – Turns out that 48-49% of people who report being in Product Marketing or report directly to the president/CEO/Managing Director have pricing responsibility. While all other departments (product management, marketing, sales, engineering, support, services or training) are well under 40%. I’m very surprised that product management is on the low list. Aren’t they the ones who best understand the value of the product? According to the data, it is more likely that product marketers are involved in pricing than product managers.
Salary – The one you really want to know. 44% of product people who make more than $140,000 per year have pricing responsibility. Only 36% of those who make less than $140K set or maintain prices.
The data are all interesting on their own (at least to us geeks), but still, here is my interpretation.
It is impossible to know causation. For example, do people work long hours because they have to do pricing or do they get the responsibility and trust of doing pricing because they are hard workers? Although I can’t prove it, my interpretation is the latter. Variables like experience, profitability, and salary indicate to me that pricing authority is bestowed upon the best performers, probably not as a reward, but as an indicator that leadership trusts these people with these most important decisions.
After all, pricing is the most powerful marketing variable, it only makes sense that companies only give that authority to people in positions of trust.
Late in 2015, Pragmatic Institute will do another survey. What would you like to know when it comes to pricing? Maybe we can add a few additional questions to test some interesting hypotheses. Let me know.
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