Author: Slobodan Farago, PhD

GP% (Gross Profit Margin) is used broadly for pricing decisions across many organizations, namely those which transition from a legacy in cost-based pricing towards a more value-based pricing approach. However, GP% is not an appropriate measure for price setting. Employing GP% in value pricing is just one of many examples where an overly simplistic compromise is often made, sometimes putting a business into bedlam, as the author explains. Slobodan Farago, PhD, MScM, Sloan Fellow, CPP is leading commercial excellence activities at the MDS Division of BD EMEA. He can be reached at slobodan.farago@bd.com.

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