Avy Punwasee, a Partner at Revenue Management Labs, recently conducted a pricing benchmark survey of 520 executives from companies with over $100 million in annual revenue in North America and Europe. The survey aimed to identify the best practices of the highest-performing companies in terms of pricing strategy. The results highlighted five key practices that these top-tier companies have in common.
One of the main findings from the survey was the importance of C-Suite engagement in pricing decisions. Companies with senior leadership involvement in pricing strategy tended to set higher pricing targets, achieve them more often, and have lower discount rates. This suggests that having leadership support and expertise can lead to better pricing outcomes and alignment with broader organizational goals.
The survey also emphasized the significance of reviewing and monitoring pricing decisions on a monthly basis. Companies that conducted monthly pricing reviews saw higher revenue growth and gross margin increases compared to those that reviewed pricing on a quarterly basis. Implementing a more frequent pricing review process could potentially have a significant impact on revenue optimization.
Clear discounting guidelines were identified as another key practice among high-performing companies. Providing sales teams with clear guidelines for discounting empowered them to negotiate prices without needing constant approvals. This allowed internal pricing resources to focus on strategic initiatives, resulting in higher revenue growth and price increases for the company.
The survey also highlighted the importance of dedicating a team to pricing within the organization. Companies with a dedicated pricing team consistently outperformed their revenue growth and price increase targets compared to those with pricing functions handled by other departments. Having a specialized team focused on pricing strategy and execution can lead to more effective pricing decisions and overall performance.
A balanced approach to pricing decisions was found to be a key factor in the success of high-performing companies. Taking into account customer value, market dynamics, and financial outcomes when making pricing decisions can lead to higher net price increases. Companies that adopt a holistic approach to pricing strategy tend to capture more value and drive better financial results.
Overall, the survey results underscore the importance of prioritizing the pricing function within organizations and involving key senior leadership in pricing decisions. Pricing plays a crucial role in determining profitability and market competitiveness, and companies that continuously refine their pricing practices are more likely to drive value and increase revenue. While the survey identified five key pricing practices that distinguish top-performing companies, establishing foundational pricing capabilities is essential for long-term success in pricing strategy.
