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The Price Advantage
This book, written by three McKinsey authors, shows that pricing excellence
can help companies outperform competitors and increase profits. Read more »
Maximizing Shareholder Value Through Effective Pricing
For all too many companies, pricing is the most overlooked profit lever. On average, a 1 percent increase in price drives a 14 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.
Three Levels of Price Management plus Pricing Infrastructure
We believe pricing can best be managed using an integrative approach that looks at issues at three levels: the market strategy level, the customer value level, and the transactions level. These three levels of price management are enabled and supported by the pricing infrastructure.
We examine critical issues in each area:
Market Strategy - How does market structure, micro-economics, and conduct affect overall market price levels?
Customer Value - Within each segment, what pricing level and structure best position your offering vs. competition while maximizing value capture?
Transactions - How do you decide the exact price to assign each customer transaction?
Pricing Infrastructure - What organizational structure, processes, incentives, tools, and support are needed to ensure sustainable pricing excellence?
We have developed broadly recognized proprietary tools for pricing including:
Value Map to explicitly assess the price/benefit trade-offs that customers make in their buying decision process.
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 approaches to assist clients across a wide range of industries and circumstances. In addition, we've recently invested in developing pricing knowledge in the areas of price volatility, pricing in distributed environments, software pricing, micromarket pricing, pricing conduct, and pricing infrastructure, among others.
