Product Segmentation for Profitability - A Cross – Functional Approach

Author: Tatiani Amaral Santos

In the world of pricing, we often hear about state-of-the-art software solutions, advanced analytics, and managing large, specialized teams dedicated to pricing. These are the glamorous elements of pricing strategy that many aspire to implement. But what happens when you’re the very first pricing hire at your company? What if no one truly understands what a pricing strategy even entails? What if, despite the lack of understanding, you’re expected to deliver concrete results that move the needle? Moreover, what if you're doing this without any fancy software, without a dedicated team, and without much support from other departments? It can feel like a challenge, right?

I’ve been in that exact position. I was brought into a company with the mission to drive profitability, establish a sustainable pricing strategy, and—perhaps most critically—build a pricing culture from scratch. I had to gain the trust and buy-in from various departments like Sales, Product Management, Finance, and Demand Planning. The lack of a dedicated budget or sophisticated tools made the challenge even greater, but it also helped me to sharpen my focus on what really matters: delivering value quickly and effectively, using whatever resources were available.

In situations like these, it’s easy to feel overwhelmed. You might feel paralyzed by the volume of work that needs to be done or by the complexity of pricing in a dynamic market environment. But here’s the key: you don’t need a huge budget, advanced software, or a large team to make a meaningful impact. Instead of waiting for all the stars to align, I realized I had to create a practical, achievable framework that could produce immediate results, without over-relying on things outside of my control.

That’s when I turned to a concept that proved invaluable: Portfolio Optimization, which we eventually branded internally as Portfolio Management to make it more relatable and digestible for other departments. The core idea behind this framework was straightforward, yet powerful. We categorized our products based on their revenue generation and margin performance, and then developed specific actions for each category. This method allowed us to focus on high-impact areas without spreading ourselves too thin across the entire portfolio.

We essentially divided our product portfolio into performance-based segments. Each product was assessed and placed into one of several “buckets,” such as Best performers, Potential performers, and Underperformers. For each of these segments, we pre-defined a set of macro strategies that we could develop further with the help of key departments like Product Management, Sales, Finance, and Demand Planning.

For instance, if a product was categorized as a “Potential Performer”—a product with good margin but underwhelming sales performance—we had a couple of strategic options at our disposal. These included:

• Increase awareness/boost marketing: This could mean collaborating with the marketing team to send out targeted newsletters to customers or launching online campaigns to increase product visibility.

• Increase sales/optimize distribution: For this, we might bundle the product with a high-sales item, expand distribution across different sales channels, or ensure the product is always available when needed.

While the framework was simple enough to understand, the real challenge lay in the Execution. A pricing strategy, no matter how well-designed, is only as effective as its implementation across the organization. To ensure this, I made it my priority to build strong, collaborative relationships with all the key departments. Gaining buy-in from these teams wasn’t an overnight task, but it was essential for the strategy to be successful.

For example, partnering with Demand Planning helped us align production schedules with our portfolio segmentation. We could allocate more production resources to high-performing products and gradually phase out the underperformers. Meanwhile, Finance played a critical role in ensuring the portfolio optimization was reflected in discount approvals, helping maintain the balance between sales volume and profitability. Additionally, I worked closely with Product Management to gain deeper insights into the products, especially when developing bundling strategies or figuring out which features could drive higher margins.

Perhaps the most crucial partnership I built was with the Sales team. Let’s face it—salespeople are often skeptical of any pricing strategy that might complicate their work or jeopardize their deals. So, I made sure to communicate the strategy clearly, involve them in the decision-making process, and provide them with tools that would make their lives easier, not harder. By aligning all the departments around a common goal and ensuring everyone was working from the same playbook, we were able to get the Sales team fully on board.

The results of this approach were not just theoretical—they were tangible. We saw measurable improvements in profitability, and slowly but surely, we began to foster a pricing culture within the company. Everyone started to understand how critical pricing was to the company’s success, and cross-department collaboration became the engine that powered our growth.

If you find yourself in a similar situation, I invite you to join me at the PPS European and Global Pricing Conference on November 21st in Berlin. There, I will share more insights and experiences from my journey. You'll see that with the right framework—no big team or expensive tools required—you can drive real, meaningful results.