Building pricing sustainability for competitive advantage
A few years ago, a major company was lauded by analysts for its savvy pricing strategy. The company had overhauled its pricing practices at the advice of external experts, gaining a healthy margin advantage over its competitors and enjoying a resultant boost to stock price.
However, once the consultants left, the company’s margin advantage began to slowly erode. A new competitor entered the market, siphoning away several of the company’s key accounts. Sale representatives dropped prices for the remaining customers, arguing that it was required to compete. The company introduced new products to stem the tide, only to find that they cannibalized higher margin traditional ones.
Efforts to ramp up internal pricing expertise did little to stem the tide – the company’s pricing experts quickly found that they lacked the political and organizational clout to implement their recommendations across the company’s decentralized global operations. The CEO was beginning to worry that their pricing advantage was gone for good.