Video
When it comes to pricing, many companies struggle on where to start, particularly when product portfolios are large and complicated. Stephen Mewborn, a partner with Bain's Customer Strategy & Marketing practice, discusses different pricing models that companies can implement without harming profitability or customer relationships.
Read the transcript below.
STEPHEN MEWBORN: When companies decide to take a look at pricing, they often struggle with where to get started, particularly if they have a relatively large and complicated product portfolio. But if you look at it at the most simple level, where can you take price? You can take price on products that customers absolutely love and that are differentiated in the market. You can take price on products that are already a little bit underpriced vs. the next best alternative in the market. And you ought to take price on products that have a margin structure such that, if you can lift price a little bit, the incremental profitability is likely to swamp the negative implications of any volume that you might lose in doing so.
Well, it's possible—even in an incredibly vast and complicated product portfolio—to apply that relatively simple logic in a systematic and disciplined way to find outliers that can be repriced very, very quickly, and with incredibly positive consequences for the business, without putting at risk much volume or customer relationships. You can use good-quality consumer insights work to find products that customers value differentially, and that they might be willing to pay a little bit of a premium for.
You can use disciplined, structured, competitive benchmarking to find those instances in which competitors are charging a little bit more for a roughly equivalent offering. And you can use good systematic analysis of the profitability of different products in the product line to find areas where a little bit of price uplift is likely to dramatically improve the profitability of a product. And if you do that in a systematic way, and roll out price changes with some sense of methodicalness and some measurement on the back end, you can often dramatically improve the profitability of a business by taking action on a relatively small number of the things that it sells.
First published in mai 2018