With rising prices, raw material costs, and energy expenses, it’s safe to say goods are more expensive than they have been in years. And there seems to be no relief in sight. In this article, the authors explore best practices for pricers in both B2B and B2C industries to grow profits despite inflation.
Demand for pricing software has continued to grow as companies strive for a more data-driven pricing approach. As a result, the market has increased, multiple providers have emerged, and total purchasing and implementation costs for pricing software systems have rapidly increased. With such a high upfront investment, one would think the returns would justify the cost. Unfortunately, 92% of pricing software fail to meet targeted KPIs within three years. In this article, the author examines the reasons behind these failing trends.
Supply chain disruptions, rising energy costs, and increased consumer demand are driving inflation rates up to levels not seen in decades. However, even after months of increases, many companies are struggling to respond effectively to the situation. To learn more about their perspective, Simon-Kucher & Partners undertook a global Inflation Pricing Study and developed this 9-step process for companies trying to navigate pricing amidst these economic challenges.
Additional fees can serve a positive business function, and increase profitability, but they can also create unnecessary problems if handled poorly. For executives, it is best to consider additional fees from a clear-eyed perspective rather than gut reactions of recoiling in fear or aggressively fulfilling one’s greed, as the author explains.
Brands in the food services industry have been losing margins because of the increasing cost of labor, transportation, and food, as well as COVID reduced traffic, which is why pricing is more relevant than ever. Many large, multi-unit restaurant brands procrastinate on pricing out of fear that an increase will be detrimental. This mindset creates a state of inaction, which is a mistake because pricing is actually the biggest lever in terms of maximizing a brand’s profitability, as the author explains.
Designing a pricing model is a difficult challenge. Competing pricing goals need to be prioritized and aligned. A great deal of data needs to be collected, organized, and analyzed. Creative ways to connect value and price must be developed. But designing the pricing model is only the beginning of the journey. What comes next is critical. In this article, the author outlines the necessary steps and common pitfalls involved with designing and implementing a new pricing model, as well as best practices for successful adoption and execution.
While we may have all hoped that the surge in the cost of raw materials and pandemic-related disruptions would dissipate, the truth is that we’re now in a significant period of inflation with most companies needing to increase prices in the high single digits or low double digits just to stay neutral. Instead of simply looking at typical “across the board” price increases for 2022, consider these three strategies to reduce customer resistance to a large price increase: Pricing’s Power of 1%, cost-to-serve, and value-based pricing.
Stephan M. Liozu, Ph.D. (sliozu@gmail.com), is the Founder of Value Innoruption Advisors, a consulting boutique specialized in value-based pricing, industrial pricing, digital and subscription-based pricing. He is also an Adjunct Professor & Research Fellow at the Case Western Research University Weatherhead School of Management. He is a Certified Pricing Professional (CPP), a Prosci® certified Change Manager, a certified Price-to- Win instructor, and a Strategyzer Business Model Innovation Coach.
Inflation is nothing new. We have observed inflationary tendencies in many countries, at least since the gold standard was abandoned in 1971. However, in today’s global economy, the inflation traffic light is on deep red. For pricing executives, all the warning signals should be ringing. In the current economic situation, one can make catastrophic pricing mistakes, but there are also opportunities to escape relatively unscathed if one gets it right, as the author explains.
This paper was originally published as chapter 5 in the book called “Pricing: The New CEO Imperative” edited by Stephan Liozu.