We help clients significantly increase and sustain profitability by building capabilities for superior pricing and margin management.
Small changes in average price can translate into huge changes in operating profit—to the benefit of a company when average price goes up, and to its detriment when average price goes down. We believe that sustained above-market growth comes when granular pricing analytics deliver credible insights with easy-to-use tools to the front lines. While we work with our clients to develop effective pricing strategies and unlock pricing opportunities, the majority of our focus is spent on building the right set of capabilities and management conviction to implement and sustain the gains. We take a “strategy before structure” approach by identifying what needs to be done and then working with the client to build out the tools, people, and systems to do it.
With this approach, our clients have improved their return on sales by 2 to 7 percentage points or more within 1 year, and sustained that growth over the long term.
Our “fully loaded” service incorporates a complete package of skills and assets to support clients with any pricing issue: proprietary benchmarking and data-driven insights, enterprise quality software that combines McKinsey knowledge and client data to provide tools for frontline managers, proprietary training approaches and e-learning tools to support long-term implementation, big data and advanced analytic models and tools to capture and sustain the gains.
What we do
We help clients turn pricing into a sustainable profit engine by:
- Discovering the real value of each product for each customer segment in order to set the best prices. We develop tools that process big data to uncover pricing opportunities at the most granular levels to identify patterns and size opportunities. That includes identifying transaction level insights on sources of leakage to help clients make rapid changes that “ring the cash register” quickly.
- Designing market strategies based on a deep understanding of how pricing is connected to the business’ goals and what competitive pressures are affecting the market.
- Delivering prices to the marketplace through an infrastructure that incorporates processes, organizations, systems and tools, and performance-management approaches that are relevant to the business. The greatest tool in the world won’t help a company that doesn’t have the people and processes to act on what the tool provides. For this reason, we take special care to connect all the elements of the pricing function with the business and the sales people on the front lines. We provide the training, tools, and capabilities for our clients so they can sustain their growth over the long term. We have established capability-building centers, for example, for on-site training, and have a dedicated implementation group that works side by side with our clients to help put recommendations and programs into the field.
Examples of our work
- trained 200 executives on how to deliver pricing impact, size opportunities, and use metrics to capture an 11 percent return on sales across the business
- helped an industrial supplier standardize discount terms and conditions, and increase price on low-volume products, leading to a 5 to 7 percent return on sales
- created $400+ million of incremental operating income by developing tailored price targets across brands, geographies, channels, and packages for a consumer-goods company
- increased a retail bank’s product revenues by 14 percent by adjusting its approach to fees and waivers
- worked with a consumer-goods manufacturer to increase frontline management of the price “pocketed” from each transaction, leading to an 8 percent increase in return on sales over 3 years
- helped a railroad establish a new competitor-price intelligence system that provided a more rigorous, market-by-market analysis of each transaction. These insights allowed the client to increase average price per transaction, leading to a $600 million increase in return on sales
Periscope offers a suite of price and margin optimization solutions that embeds sustainable best-in-class practices. The Periscope offering enables companies to:
- Gain transparency into data at a granular level and unlock practical insights for continuous price improvement (Performance Vision)
- Monitor and assess competitive positioning in real-time on an unlimited number of products and price points (Market Vision)
- Optimize price setting by simulating the impact of new prices (Price Advisor)
- Help sales teams to structure more profitable deals by applying benchmarks and suggestions integrated with contract life-cycle management (Deal Advisor)
- Build organizational capabilities with a unique combination of in-person and technology-based training (University)
Periscope has acquired and partnered with a number of companies to enhance our capabilities. For example:
- 4tree is a big data solution company serving retail, fast moving consumer goods (FMCG), and B2B companies. With this acquisition, Periscope is able to bring clarity to customers’ buying behavior at near real-time speed, enabling improved assortments, promotions, next-product-to-buy recommendations, and product pricing. more
- Eversight, the leading provider of cloud-based software designed to improve promotion effectiveness and make better use of trade promotion dollars, and Periscope now offer consumer goods manufacturers a way to optimize offers to significantly improve conversion. more
Learn more on the Periscope site
The Price Advantage was written by three preeminent pricing experts at McKinsey. This book provides executives with a leading-edge yet practical guide to identifying, capturing, and sustaining pricing gains.