Pricing Management Is BIG!

If you have not seen the front page Wall Street Journal article that was published March 27 on pricing management find a copy and read it. The article featured Cleveland based Parker-Hannifin Corporation and the huge improvement in financial performance that they realized as a result of better pricing management.

We are seeing more and more companies of all sizes embracing disciplined pricing strategies that drive margin lift. Parker Hannifen moved from a cost plus methodology of pricing its 800,000 parts to a value based approach that boosted operating income by $200 million since 2002.

There are several relatively simple and effective tools that can be employed to begin managing pricing better. The best place to start is to begin tracking the average prices on a regular and frequent basis. This will indicate whether prices are generally rising or falling. Until you can monitor prices effectively you are only guessing at the trends.

Tracking average prices casts a spotlight on pricing within the organization and will cause management to ask questions about price changes that will likely lead to better processes.