Pricing and its potential
Today, pricing or price management is a differentiated management approach that optimizes all areas that are related to price. In our consulting projects on pricing, we therefore do not usually focus on individual measures, but ensure that pricing is optimized as a whole. In this way, we ensure that all earnings potential is consistently leveraged. If all process steps are optimized, increases in the return on sales of between one and three percentage points are possible under normal circumstances – in individual cases even more. With sales of 100 million euros, this means an increase in profit of 1 to 3 million euros. Price management therefore represents one of the central levers for improving earnings in any company.
Price management structure
We use our integrated price management approach to structure our pricing. The graphic below provides an initial overview. Essentially, two levels can be distinguished in integrated price management, which must be considered in parallel. On the first level, the relevant contents are defined. Here, a distinction is made between:
- Pricing Strategy and Organization
- Pricing / Product (list prices)
- Pricing / Customers (conditions and discounts)
- Price Enforcement / Controlling
On the second level, the associated processes and organizational forms are considered. All content must be backed by clear processes in order to achieve lasting pricing excellence.
Taken together, these steps result in considerable potential to enable targeted yield increases. The individual process steps are explained in detail below.
Classic pressure points and optimization approaches
Pricing Strategy and Organization
Classic corporate goals are the maximization of sales and / or profit. Of course, the set product prices should contribute to the achievement of these objectives, but there is comparatively rarely a written and concrete pricing strategy, which defines the framework conditions for pricing or price adjustment. A well-founded strategy creates the basis for optimizing existing pricing.
It is not always clear where the shoe pinches, or various options seem to come into question for adjusting and improving pricing management. With the help of our pricing audit, it is easy to determine in these cases where – based on the status quo – the greatest potential is hidden and how it can best be activated.
Value pricing can generally achieve significant increases in revenue. At the same time, benefit-based pricing presents companies with the great challenge of knowing exactly what customers are willing to pay. With a comprehensive set of methods, we can assist you in systematically estimating this variable and the resulting opportunities for maximizing revenue.
Spare Parts Pricing
Even in the case of services and spare parts, the customer’s appreciation usually has little to do with the actual costs incurred. A special feature of spare parts pricing is that often thousands or even hundreds of thousands of different parts are sold, which can hardly be priced manually. Nevertheless, our extensive experience in this area makes it possible to develop profit-optimized solutions with you using approaches such as value pricing, family pricing and partial automation through software solutions.
Reinforced by ongoing globalization, prices are increasingly no longer set or adjusted for the national market alone. Instead, differentiated solutions must be found for different countries and regions. International pricing takes these special features into account and uses, for example, scoring models or country clusters as starting points for meaningful differentiation.
New pricing models
Pricing is much more than just setting or adjusting prices – especially because, with increasing digitization, many new pricing models such as subscription or pay-per-use have come into focus alongside one-off payments. Therefore, depending on the offer, the model that is best suited for customers and companies must be weighed up.
E-commerce and online retailing
Increasing digitization also brings other special requirements. Sales channels have also become more digital. To be successful in online retailing, a well-thought-out channel strategy is needed that is coordinated with the pricing strategy and conditions system so that the different areas do not block each other but support each other and present a consistent image to the customer.
Condition Systems & Target Price Calculator
Products are often not sold at list price but offered at customer-specific prices. However, these discount and condition systems are often not tied to fixed conditions but have rather developed historically. In order not to undermine the customer’s willingness to pay as a result, targeted conditions management is required.
The Target Price Calculator, for example, provides a very helpful method of assigning new prices and discounts in a way that maximizes margins.
Price implementation / Controlling
A pricing consulting project is only successful if the defined measures are also sustainable in the long term. This requires processes that anchor pricing know how in the company. Price controlling also enables management to steer in a target-oriented manner on the basis of recorded key figures.
The results of our consulting projects are defined pricing processes and recommendations for a firm organizational anchoring of price management – with special consideration of the area of conflict between product management, marketing, sales and corporate management. In addition, we create key performance indicator systems for our clients and ensure that they are regularly collected as part of the reporting system.
Leverage your pricing potential with our pricing consulting services
We will be happy to answer your questions and provide you with further information.
Prof. Dr. Oliver Roll
Prof. Dr. Oliver Roll is Chair of “International marketing and price management” at Osnabrück University of Applied Sciences. He is a member of the European Pricing Platform’s Academic Advisory Board. Prof Roll gained extensive management experience at Simon-Kucher & Partners, before moving to Roland Berger Strategy Consultants to establish their Pricing Excellence Unit. He has managed marketing and pricing projects for numerous international companies. Prof. Roll also speaks at various management conferences on the topic of price management, and has published numerous articles concerning different aspects of the pricing process.
Kai Pastuch is Managing Director of Prof. Roll & Pastuch – Management Consultants. Before joining as Managing Partner, he was Director at a leading international strategy and marketing consultancy. As a graduate in business informatics, he also manages our software company nueprice, which specializes in the pricing of spare parts with the product of the same name. Mr. Pastuch has extensive project management experience from numerous projects for large international companies and German medium-sized businesses in the areas of price management, marketing, sales and strategy. In addition to numerous publications in renowned journals and the publication of the reference books Praxishandbuch Preismanagement and Big Deal Management, he is a sought-after moderator and speaker on all aspects of sales and pricing. As a practice-oriented manager, he likes to get personally involved in our projects and contributes his broad experience in workshops and steerings.