Optimize your prices

When profitability becomes a problem, most companies focus on cutting costs.

In doing so, however, many tend to underestimate a very powerful driver of profits – price optimization. Many observers note that companies often have as much room for pricing improvements as they do on the cost side. This is because prices frequently result from more or less structured discussions between finance, marketing and sales – all of which have different visions – rather than systematic efforts to build a relevant strategy. Not to mention the fact that a significant gap often exists between the official price list and what customers actually pay.

We would like to give you a closer look at this topic, based on selected publications by leading experts. The following messages appear to be particularly important:

– Price must not be set based merely on margin objectives. It must capitalize on the value created for different customer segments.

– Beware of the traps likely to undermine price optimization efforts, namely insufficient understanding of the cost structure, slippage due to misaligned sales practices, and competitive blunders.