Business leaders who seek to increase profit margins and improve business performance are increasingly turning to effective pricing analysis to boost their bottom lines, say Julie Meehan, Chuck Davenport, and Shruti R. Kahlon in Deloitte's August 2011 “Pricing Effectiveness Global Benchmark Study” -- a sidelight of this study was to shed light on the relationship between company performance and effective pricing capabilities.
The study noted that companies that actively pursue pricing as an important part of their strategy typically outperform industry peers on several financial metrics:
Image courtesy of Deloitte
What struck me was that such companies, identified as "high performers" -- those who think and act differently and perform better than their peers -- showed a number of winning traits in common:
Companies With Highly Effective Price Management:
1. Have a more centralized pricing function, with solid support from the top layers of management.
2. Look beyond gross profit to measure the profitability of each transaction.
3. Have a consistent focus on pricing across all phases of the economic life cycle.
4. Appear to be the leaders in adopting price management software.
5. Are more likely to understand the importance of key pricing competencies and effectively support them.
6. Are nearly twice as likely as low performers to have a C-level executive involved in pricing.
With an approach that focuses on developing the organizational and process aspects of pricing, improving analytics, and understanding the customer, a company can direct its investment toward those efforts with the highest return.
Pricing analytics techniques that provide insight about what your competitors are doing can dramatically improve your strategy and investment decisions. One of the best ways to keep abreast of the information you need is to make pricing and assortment intelligence tools and analytics a key part of your pricing strategy.