Not many companies would characterize themselves as having an obsession with pricing, and yet pricing represents one of the most attractive and most overlooked opportunities out there to increase profit.
There have been a number of studies over the years that have highlighted the importance of pricing as a key lever in driving profit increase. Large consulting firms such as A.T. Kearney, Boston Consulting, and PwC have published a vast array of data that have indicated pricing as the fastest and the most efficient way to improve your bottom line. Perhaps the most often quoted example, the McKinsey study, found that a 1 per cent price increase, if the demand remained constant, would result in an average of an 11 per cent increase in profits.
The graph below shows that pricing has more leverage than reducing costs or growing sales volume. It is also an area that relatively few companies focus on. Mastering how to set prices can give your company a competitive advantage.