Pricing is the most sensitive profit lever that managers can influence, where very small changes in average price 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. Through enhanced price management and capability building, most of our clients can sustainably improve their return on sales by 2 to 7 percentage points or more within 1 year.
What we do
We help clients achieve pricing excellence by identifying opportunities—and issues—that fall into three distinct but related levels:
- Market strategy, where we look to understand how market structure, micro-economics, and conduct affect overall market price levels
- Customer value, which creates an understanding of the pricing level and structure that best positions your offering against the competition so as to maximize the value captured in each target segment
- Transaction level, where the exact price to charge each customer is set
We develop approaches and programs to capture those identified opportunities, and also work with clients to:
- Craft the infrastructure—pricing processes, organizations, systems and tools, and performance management approaches necessary to support the pricing function in a business
- Build client capabilities to sustain pricing improvement
Examples of what we do
- 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
Our proprietary tools and knowledge
- Periscope draws on extensive experience in driving quick impact to pinpoint hidden sources of value and pricing opportunities. Learn more on the Periscope site.
- PriceMatics is a four-step approach to capturing growth and profits from pricing, sustained and augmented by client-tailored training courses.
- The Price Advantage, 2nd edition 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.