Sizing the prize
The power of pricing
It’s been said may times before that of the levers a company can pull to improve performance, pricing routinely delivers the most significant results. Still, many business leaders have their doubts.
In fact, pricing often ends up on the bottom of the list of changes companies make in their quests to improve performance. Why is that?
For some, the question is how much pricing can really deliver. Performance improvements are always welcome, but exactly how much should the business expect from pricing? Others question if the improvements that can be gained from pricing are worth it in the grand scheme of things. How much extra effort will it require elsewhere in the business? What are the unexpected ripple effects? Is it worth the risk of losing customers?
These are all legitimate concerns – and we’ve encountered them in our work helping a variety of companies improve performance through pricing. We recently commissioned an analysis of more than 100 pricing engagements that we’ve performed over the last five years to more effectively characterise the benefits achieved and address such concerns. Starting with reveneue and margin improvements, we put a host of other factors under the microscope, from timeframe of benefit realisation to value by improvement lever and beyond. We wanted to understand in detail how, when, where, and why pricing improvements had the desired impact on the business.
In this article, you will find selected results of this study – along with our thoughts on what they mean for companies looking to get the most from their efforts in the area of pricing.