Author: Mike Gorham
As pricing professionals, we have all heard the saying "price is the most important lever". Recent CIL analysis found that in the UK, price has 6.7x the impact of volume growth, with older, international studies have estimating it closer to 10x.
Yet, many companies still take the most important decision in their business effectively blind. To give a couple of examples from the tech sector:
· In 2023, 93% of managed service providers set pricing without supporting research or analysis.
· In 2022, SaaS companies reported spending an average of just six hours to set their pricing.
Addressing Pricing Optimisation Concerns
Many businesses simply lack an effective framework for pricing. They under-value pricing research because they lack experience with it, and they fail to recognize the biased and incomplete nature of information gathered in sales conversations. This leads to rushed decisions taken with insufficient information.
A Framework for Enhancing Data-driven Pricing Strategies
A practical framework can help businesses refine their pricing approach, make data-driven decisions, and unlock hidden value for sustainable growth. By following these steps, executives can build confidence in their pricing, take early action for maximum impact, leverage expert insights, and maintain control over pricing for sustained success.
Build confidence in price positioning
A successful pricing strategy begins with a thorough evaluation of pricing power and growth potential. By leveraging market data early on, businesses can gain the insights needed to ensure their pricing is competitive and well-aligned with market demand.
This data-driven approach enables informed, confident decisions that maximise profitability and unlock greater value.
Develop a Clear Understanding of Value
Effective pricing starts with a solid understanding of what customers truly value. Conducting accurate, unbiased customer research is critical to capturing insights into customer perceptions, market positioning, and the unique value your product or service offers. This helps ensure that pricing reflects the true worth of your offerings and resonates with the market.
This research ensures that pricing decisions are based on real data rather than assumptions, leading to more precise and effective pricing strategies.
Leverage External Expertise
Realising a company’s full pricing potential requires focused effort. Management teams, despite their talent and motivation, will often lack the dedicated resources and specialised skills needed for comprehensive pricing market research and commercial excellence initiatives. When internal resources are limited, partnering with external experts can fast-track the pricing strategy process. External specialists bring deep insights and experience, allowing businesses to refine their pricing models more effectively. This collaboration not only optimises pricing decisions but also helps build critical skills within the company, ensuring long-term capability in pricing management.
Maintain Pricing Control for Sustained Success
Effective pricing control hinges on robust data and well-defined processes. By investing in data platforms that provide insights into customer profitability and pricing performance, businesses can manage both new and existing accounts with greater accuracy. This level of control allows for more precise adjustments and helps ensure that pricing strategies remain adaptable as the market evolves.
To achieve long-term success, your systems and processes must be designed to support scalable and repeatable pricing strategies, enabling sustained growth and profitability.
Mastering strategic pricing is essential for any business seeking long-term profitability and growth. By taking a data-driven approach and leveraging the right expertise, businesses can ensure their pricing strategies are both effective and sustainable. Through careful evaluation of pricing power, understanding customer value, and maintaining strong control over pricing systems, companies can unlock hidden value, improve margins, and stay competitive.
The steps outlined above provide a clear, actionable framework for executives looking to make pricing a key driver of their success. Implementing these strategies will not only enhance profitability but also build a more resilient and adaptable business model for the future.
Mike Gorham, CIL’s Pricing Director, will lead a breakout session on “Sustainable profit growth: Comprehensive pricing model insights” at the PPS Europe conference in Berlin, November 19-22. His presentation will be Friday at 14:20.
Mike Gorham leads the Pricing practice at CIL, an international strategy consultancy. He specialises in pricing, strategic marketing, and sales effectiveness.
Mike combines strategic insights, data analytics, and practical sales experience to deliver holistic and sustainable pricing improvements for clients across various sectors and sizes. He holds a BSc from the London School of Economics and an MBA from INSEAD.
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