It’s one thing to announce a list price increase, another to actually pass it on to customers. Many business-to-business (B2B) companies end up giving back much of their price increases in the form of discounts, rebates or other forms of leakage. Realizing a price increase requires solid pricing processes, which most companies struggle to maintain. For every $1 increase in a list price over the previous year, the median company realized only 68 cents, according to analysis from PricefxPlasma™ powered by Bain & Company, which compares operational pricing data from a panel of companies. There’s a wide variation: The top quartile of companies realized 95 cents on the dollar, while the bottom quartile took 42 cents. Moreover, this yield is unrelated to the magnitude of the increase; companies with the largest list price increases gave back about the same in percentage terms as those with small increases. Four key components go into realizing a higher price:
- targeted strategy―price increases that differentially target discrete customer segments;
- internal alignment―aligned pricing policies and governance help to link the intent of the increase with the actions of the sales organization;
- coordinated motivation―incentive structures and targets that promote price increase goals; and
- effective communication―consistent sales messaging to customers.
Plasma is a powerful price benchmarking platform that analyzes your pricing practices across more than 30 critical KPIs, helping you make faster, better decisions and improve every facet of your pricing strategy.
Join Pricefx Chief Customer Officer Billy Graham and Bain Expert Partner Chuck Davenport for a live conversation on May 12: The Top Pricing KPIs You Should Be Measuring & Benchmarking Against to Help Your Company Navigate a Volatile Market.