Pricing Management

Over the last decades increasing liberalization of markets and freedom of geographical boundaries exponentially increased business competition and put additional downward pressure on margin and profits. To outset this external push and deliver increasing value to external and internal stakeholders, companies adopted new methods and defined new processes to optimize supply chain, squeezing purchasing and reducing costs.

Effective enhancement of the costs side of the pricing equation " Price - VC -FC = OM " left Senior Management with a single choice and a unique opportunity to deliver better operational results: optimize price management and its solutions which are & will be pivotal in delivering increasing margins in all organizations for the coming years.

Although challenging, getting pricing right is the fastest and most effective way to boost profits compared to fix cost reduction, variable cost decrease or volume increase. As shown in Fig.1 shows the effect a 1% increase  in price in Global 1200 economics Companies.

Fig.1 1% price results increasing 11% operating profit

To better figure out the leverage of price, Fig. 2 illustrates the % effect on operating profit of 1% increase in the 4 dimensions.

 

Fig. 2        Comparison of Profit Lavers on Operational Profit

Here, the potential of pricing management disclose its entire power.