New competitive entrants, sophisticated procurement departments and slow economic growth are conspiring to pressure profit margins like never before. For companies intent on preserving—and growing—margins, it is imperative to adapt their game plan.
Pricing strategy needs to be a key element of that plan. As a lever for growth, it offers an under-leveraged and often neglected opportunity for substantial and sustained revenue and margin improvement. Just a few points improvement in price realization, driven by a more strategic approach and better execution, can translate into substantial enhancement of a firm’s profitability.
Effective pricing strategy initiatives can quickly add up to 3 percent of addressable revenue to the bottom line. These improvements are typically derived from a series of “singles and doubles” that represent a portfolio of opportunities that can be implemented over time. Once an organization achieves “pricing excellence,” it can outperform its competitors in margin performance and ability to adapt to new market conditions—a source of true sustained competitive advantage.