A change is taking place. In the last 3-4 years the interest in pricing management among industry leading firms has skyrocketed. Companies like Eaton Corporation, Parker Hannifan and Cardinal Health have each established new pricing management departments that focus exclusively on price. The Professional Pricing Society, a trade group for pricing experts, has seen its membership grow four-fold in the last few years. New books on pricing management are being published at an unprecedented rate.
Pricing management is a powerful driver for improving financial performance.
Even the smallest changes in price can have a dramatic effect on profit. Consider that the average S&P 1000 firm will realize a 12.5% jump in net profit with a simple 1% price increase. And, of course, the equation works in the opposite direction as well…a 1% price discount cuts profits by 12.5%. The smallest adjustments in price can transform the bottom line for many companies and in some cases mean the difference between profit and loss.
Realizing significant profit gains does not require huge improvements in price. In fact, no other profit driver has the leverage effect that pricing has on the bottom line. Selective, small improvements that may be barely detectible by the marketplace can make a noticeable improvement in financial performance.
