Pricing matters. A 1% price increase typically delivers an 11% impact on profit. So in a volatile and competitive market, it is more important than ever to give pricing the attention and focus it deserves.
We asked pricing specialists from over 500 companies from around the world about pricing as part of their business strategy and how they currently approach it. The results show significant trends in pricing capabilities and practices between different industries and countries, and highlight a number of opportunities for further improvement.
Implementing a great pricing strategy can be complex and involves excellence in all four aspects of pricing. But when taken seriously, with a clear strategy in place, pricing can help make your company more profitable now and in the future.
Every company's growth potential and journey is different. We believe that some approaches are much more effective than others to navigating towards two outcomes: profitable growth now for your business and a better 'growth fitness' that will allow you to identify and capture future growth opportunities. Our survey focuses on pricing, one of the most powerful and effective ways to achieve profitable and sustainable growth.
There are a number of challenges for businesses when setting or changing their pricing strategy. These include having a clear picture of the true profitability of customers and products, ensuring consistent management of information and making sure data exists in a form that can help companies make good pricing decisions, in a timely and up-to-date manner and knowing what your customers value.
It is clear from our findings that very few companies 'strongly' adopt one pricing strategy or another. Most look to match competitors' prices, whilst some price the benefits to the customer. Our analysis suggests that the more infrequently that companies can, or do make adjustments to prices, then the greater the impact will be of any pricing decisions. We also found that optimising pricing does not always come down to simply increasing or reducing prices. Often changes in product/service features, the marketing strategy or channel focus is the main way of improving performance, such as low cost airlines pricing luggage separately from the cost of the fare.
Looking at pricing in a structured way simplifies a complex subject and reveals opportunities for improvement. In our experience, working with companies across a range of industries, there are four aspects of pricing that are particularly useful to consider:
Nazanin Naini speaks with Consulting partners David Lancefield and Mike Greig about the latest findings from the Global Pricing Report and how you can use pricing as a powerful tool to make an impact on your bottom line