For all too many companies, pricing is the most overlooked profit lever. On average, a 1 percent increase in price drives a 7 percent plus boost in operating profit dollars.

Nevertheless, many companies do not understand the pricing dynamics they face, fail to give pricing the management care and attention that it deserves, and – in the process – let countless millions in profits slip through their fingers.

Strategic and Tactical Approach
Our pricing work covers strategic and tactical pricing opportunities.

Our strategic pricing approach begins with a strong belief that price needs to be based on value, not cost. We determine how capacity, cost structure, technology, demand, price levels, and other trends affect overall industry price levels, and we help clients make strategic decisions that will have a positive effect on industry prices and profitability. We also use sophisticated research to segment markets. This enables us to determine what price level provides specific products with a price/benefit advantage versus the competition, while maximizing profitability. We have developed broadly recognized proprietary tools in this area including:

• Value Map to explicitly assess the price/benefit trade-offs that customers make in their buying decision process.

Our tactical pricing approach is based on our detailed analysis, by product and by customer. We use a number of key tools to determine the exact price – including base price, discounts, allowances, and adjustments – to assign to each customer transaction. We have also developed broadly recognized proprietary tools in this area including:

• Pocket Price/Pocket Margin Waterfall to determine the profitability of detailed transactions.

• Pocket Price Bands to assess the variability of transaction prices and the underlying drivers, both internal and external, of that variability.

Specific Applications
We have refined our strategic and tactical approaches to assist clients with solutions pricing (the bundling of products and services in one solution for customers) and postmerger pricing – situations that hold surprisingly large pricing opportunities that few companies fully harvest.

Additionally, we have recently completed an up-to-date perspective on the pricing software landscape and have developed practical approaches to influence constructive price leadership/followership behavior in markets.