Building an Effective Pricing Management Capability
A significant number of blue-chip companies acknowledge pricing improvement as part of their earnings success,* a finding supported by a Deloitte study of company performance and pricing that found organizations with effective pricing capabilities significantly outperform industry peers along several financial metrics. (See the Deloitte Review article The Price of Pricing Effectiveness: Is the View Worth the Climb?)
The critical word is “effective,” as many companies seem to make little progress in driving the kind of consistent pricing discipline that yields the results they need, observes Julie Meehan, a principal in the Strategy & Operations practice of Deloitte Consulting LLP. “Establishing or broadening pricing capabilities can be a complex, risky and sometimes costly investment that requires specific skills and a good reserve of commitment on the part of leadership,” says Ms. Meehan, who co-authored the Deloitte Review article with Chuck Davenport and Shruti Kahlon, both senior managers in the Strategy & Operations practice of Deloitte Consulting LLP.
The authors analyzed data from more than 40 companies that responded to an online survey conducted by Deloitte’s Global Benchmarking Center and Deloitte Consulting LLP on pricing competencies, performance and investment. The analysis revealed that proficiency in pricing requires a series of changes in data collection and design, as well as analytically based decision processes. “Moreover, organizational changes are often required to support processes based on a newly acquired arsenal of data—and more importantly, to deliver the insights derived from it,” Ms. Meehan says.
Read more from the Wall Street Journal.
1. Global Benchmarking Center, “Pricing Effectiveness Global Benchmarking Study,” Deloitte Consulting LLP, August 2011.
2. Based on The 2011 Shift Index (Deloitte Development LLP) of Compustat data; Impact estimated based on the average Fortune 1000 company.
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