When there is underperformance, a union between marketing and pricing can help diagnose issues. But that is not the only reason to pull these two functions together.
In classic marketing theory, pricing is one of “the 4 Ps” along with product, promotion and place. Yet, most apartment operators put pricing into a different department than marketing. Typically, pricing reports to the head of operations; sometimes it reports to the CEO; and, occasionally, I’ve seen it report to the Chief Information Officer (CIO) or to the CFO.
Rarely, do I see marketing reporting to the same C-suite executive, and I think that there are significant gains to be made by changing that.
When I led the first Pricing and Revenue Management (PRM) team ever established in the industry, we reported to the CIO. That was because of the CIO’s past experience in hotel revenue management and the complexity of the technology at the time. Over time, the growing importance of digital marketing and related marketing technology drove us to a point where marketing also reported to the CIO. Then, with a new emphasis on marketing analytics, marketing reported directly to me in what I believe was the first example of marketing and pricing reporting to the same person.
As we brought pricing and marketing together, we saw significant improvement. Here are just a few things that happened:
1. Improved diagnosis.
One of the most difficult things to do in operations is to diagnose the cause of under-performance. Is pricing too high? Are we not generating enough leads? Or is sales execution the real cause? When marketing and pricing were separate, it was fiendishly difficult to figure out what caused problems because no one wanted to be the “cause” of the under-performance. Once pricing and marketing reported to the same executive, there was more of a natural team effort to find the cause and less competition to not be that cause.
2. More proactive collaboration.
One of the natural (positive) consequences of being on the same team was that marketing and pricing participated in many of the same meetings, where they rarely did so before. This led to the creation of relationships between marketing and pricing that proactively identified issues and avoided problems before they occurred, and it all happened quite organically. A great example of this is more coordination around deciding whether increased marketing spend or increased pricing incentives is the best way to get the desired improvement in leasing.
3. Improved marketing analytics.
In recent years, apartment housing companies have made great strides in marketing analytics capabilities, but there is still a way to go. Most associates are subject matter experts in their functions, but few are truly strong analysts. In fact, it’s not unusual for PRM to have most (or even all) of the analysis strength on their team. When marketing and pricing are closer together, it’s easier to bring some of that pricing analytical strength to bear on marketing issues. With marketing so reliant on digital channels, this is even more important now than it was a decade ago.
So how does one get started bringing these functions closer in alignment? Admittedly, it’s not always easy to find one person who can lead both teams. If you have someone like that, go for the change right now. If not, look for an appropriate executive to whom both the marketing and PRM leads can report. In my experience, collaboration improved when the head of marketing and I (then just the head of PRM) began reporting to the same C-suite executive. That helped us understand the potential and led to marketing and PRM both reporting to me.
Over the past couple of years, I’ve seen several conference sessions bring marketing and pricing together on the same stage. That’s a good start, yet it’s still quite rare to have marketing and PRM reporting to the same executive. I hope 2019 is the year where CEOs and COOs re-think this and gain the advantages of bringing marketing and pricing closer together.