At many small businesses, pricing meetings always involve the same people: the owner, the accountant or finance manager, and a cost spreadsheet open on the screen. They discuss the margin percentage, compare it with the previous month, and settle on a figure. No one from the technical team is invited. No one from sales weighs in. The decision may be sound from an accounting perspective, but it falls short commercially because it treats margin as just another calculation to complete, rather than a choice about what the product is worth.
This habit is not the result of a lazy process. It is the natural consequence of treating pricing as a financial task. But margins reflect information that the finance team cannot access on its own: how much a technical feature cost to develop and how much it truly differentiates the product; whether customers recognize that difference and are willing to pay for it; and the position the company wants to occupy in its market. Bringing these three perspectives together in a single margin decision is what separates strategic pricing from a spreadsheet calculation.
The Problem with Deciding Margins from One Perspective
When margins are set solely through discussions between the owner and the finance team, they tend to converge on a fixed percentage applied across the entire product line and adjusted only when monthly results come under pressure. This pattern has a name: one-size-fits-all margin. It is the clearest sign that pricing is based on cost alone and fails to account for anything else.
The practical impact becomes clear quickly. A product that was expensive to develop and offers a genuine technical advantage gets the same margin as an ordinary item—and the company leaves money on the table because customers would pay more for that advantage if the price reflected its value. At the same time, a fast-moving product in a highly competitive market carries the same margin as exclusive items, making it too expensive for the market and costing the company sales every day. Both mistakes stem from the same cause: no one brought to the table the insights held only by those who developed the product or speak with customers.
Engineering: What the Product Really Delivers
The technical team is the only one that knows exactly what sets one product apart from the next. This is not a salesperson’s opinion or an assumption made by finance—it is the expertise of those who defined the specifications, selected the material, and solved the engineering problem that the competitor could not.
This information changes the margin because it changes what is being sold. A product with a technical attribute that is difficult to replicate can sustain a higher margin because its differentiation supports the price even when a competitor lowers theirs. A product with no meaningful differentiation cannot sustain the same margin, even if its production cost is similar—in that case, raising the price only drives customers to a competitor that charges less for the same level of value.
Without engineering at the table, the margin calculation overlooks this difference. It treats a differentiated product and a generic one as the same pricing decision simply because their manufacturing costs are similar.
Sales: translating attributes into perceived value
A technical feature only becomes a pricing argument when someone explains what it means to the buyer. This is where the sales team comes in—not to push discounts, but to share how often customers ask about that differentiator, how much more they are willing to pay for it, and when price objections arise in the conversation.
This insight is empirical, not theoretical. Finance knows how much it cost to produce; sales knows how much the market is paying for it because the sales team hears the refusals, the requests for discounts, the “I think it’s too expensive,” and also the “I’ll take it without haggling.” Ignoring this information when setting margins means discarding the company’s only direct channel to customers’ actual willingness to pay—instead of discovering the value through the market, the company tries to guess it from a spreadsheet.
Management: the strategy behind the number
The third perspective determines the role each product plays in the portfolio. A company may choose aggressive pricing for an entry-level line to drive volume, while using higher margins on a premium line to support profitability. It may enter a new market with a lower margin, knowing the product has yet to gain recognition there, while maintaining a high margin in a market where it is already well established—the same product, two margins, because customers do not perceive its value in the same way in both markets.
That decision is not up to engineering, which focuses on the product, or sales, which focuses on customer conversations. It belongs to those who see the business as a whole and decide which market position is worth pursuing. Without this strategic layer, margins become reactive, rising and falling with each month’s results, with no medium-term direction.
An example of how the three perspectives change the price
An industrial equipment company develops a component with a sensor that reduces the customer’s maintenance needs by one-third—a genuine technical attribute identified by the engineering team. The component costs R$ 200 to produce.
In the margin meeting with only the finance team, the standard markup for the product line is 40% over cost:
price = cost × (1 + markup) = R$ 200 × 1.40 = R$ 280
Sales adds another data point to the discussion: customers who already use the sensor report monthly maintenance savings that far exceed the price difference, and none have complained about the price so far—price objections only come up with products that lack this differentiator. Management decides that this product line should be positioned as the segment’s technical benchmark, not as an entry-level option. Together, these three perspectives support a higher markup of 75%:
price = cost × (1 + markup) = R$ 200 × 1.75 = R$ 350
The difference between R$ 280 and R$ 350 is neither a calculation error nor greed: the margin reflects information that only emerged when engineering, sales, and management joined the discussion. Using margin calculated as a percentage of price, the same product sold for R$ 350 with a cost of R$ 200 yields a margin of approximately 43%:
margin = (price − cost) ÷ price = (R$ 350 − R$ 200) ÷ R$ 350 ≈ 0.4286 → 42.86%
These two figures—a 75% markup and a 42.86% margin—describe the same price in different ways, and one of the most common pricing mistakes is to confuse markup and margin as if they were the same percentage.
How to bring these three voices into the decision without creating an endless committee
Bringing different teams together doesn’t have to mean long meetings or a bureaucratic process. What changes is the type of question discussed before the price is finalized:
- What does this product deliver that its closest competitor does not? (engineering)
- How often do customers mention this differentiator, and how much do they already pay for similar products? (sales)
- What position should this product occupy in the portfolio: entry-level, mid-range, or flagship? (management)
- Is the resulting margin the same as for products without this differentiator, or does it reflect the difference?
When the answer to the last question is “the same as always,” the margin probably does not reflect any of the three perspectives—it has reverted to a fixed number based solely on cost.
Margin decisions do not become less agile when they draw on input from multiple teams; they become less accurate when they rely on just one. A company may have the most rigorous finance team in its industry and still leave money on the table or lose sales because of price. Neither mistake shows up in a cost spreadsheet—they stem from what the spreadsheet alone could never reveal.
