Pricing – often overlooked, rarely simple, always powerful.
Pricing is one of the most powerful, and underused, levers for growth. It’s often overlooked as simply a technical exercise, when in fact, it’s one of the most powerful tools for driving profitability. In this article, Alex Marshall, Senior Partner at CIL, sits down with Patric Kirchner, CIL’s Pricing and Commercial Excellence Partner, to break down the basics. By the end of this article, you’ll understand why pricing deserves to be higher up the agenda and have a better sense of how to spot a pricing problem within your organisation.
Why pricing deserves more attention
Here, Alex and Patric delve into the importance of pricing. They emphasise that pricing is the most powerful lever for improving profitability, yet it’s often undervalued when compared to cost-cutting or volume increase activities. Pricing is not just about adjusting numbers up or down, instead it is a cross-functional capability. Getting it right requires coordination across marketing, sales, finance, and key account management.
But despite pricing being a powerful tool for profitability, many organisations hesitate. Sales teams often fear losing customers and the benefits of price increases are often underestimated. Changing pricing strategy requires significant effort, discipline and cross-functional coordination – but done well, it can transform performance.
What you should remember:
- Pricing is the strongest profit lever. It is more effective than reducing costs or increasing sales volume.
- Effective pricing is a cross-functional capability. Getting it right involves coordination across marketing, sales, finance and account management teams.
- Fear of customer loss and underestimating the upside hinder companies from optimising pricing strategies.
- Discounts are overused, whereas well-executed price increases can lead to greater profitability with less effort.
How to spot a pricing problem
In the next part of the conversation, Patric draws on his experience as both a consultant and a practitioner to outline two common pricing challenges.
The first are short-term optimisation tasks like adjusting list prices, discount structures and promotions. The second are longer-term challenges around pricing resilience. This challenge requires building functional specific skills, robust internal processes and clear governance to consistently manage and adjust pricing over time.
A key indicator of a pricing problem within an organisation is whether leadership can quickly quantify the effect of price versus volume on financial performance. If not, it’s a sign that pricing is not being used as a strategic lever. A useful tool is the concept of a “price waterfall analysis,” which helps companies to pinpoint where customer investments, such as discounts, rebates and other off-invoice costs, are eroding margin between gross and net revenue.
Finally, Patric also stressed the need for agility. During COVID-era inflation, many businesses were caught out by the inability to adapt quickly. A lack of pricing governance and implementation processes remain a hidden vulnerability for many.
What you should remember:
- Pricing optimisation is a tactical, often one-off exercise adjusting prices, discounts, and promotions to boost performance.
- Pricing resilience is cross-functional and ongoing, involving governance, annual updates, or consistent price performance management.
- If a company cannot rapidly measure price and volume effects, it’s likely neglecting pricing as a strategic lever and lacks foundational data capabilities.
- Speed and clarity in pricing decisions and implementation are essential, a slow response can leave companies vulnerable to market shifts.
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Pricing is complex, strategic, and hugely effective. But, tackling it doesn’t require full-scale transformation. It starts with curiosity. Asking the right questions, digging into your data, and exploring how pricing really works in your business can unlock significant value. Whether you’re facing tactical optimisation or deeper organisational challenges, the potential upside is too great to ignore.
If this article has sparked questions or you’re wondering where your pricing opportunities lie, get in touch.
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