Pricing is still too much guesswork for European companies, study proves

A European Pricing Platform (EPP) study shows that pricing is still a lot of guesswork for many European companies.  Most companies overestimate their pricing maturity level. That way, they lose a considerable revenue. 

The 2013 European Pricing Maturity study represents the opinions of 121 pricing executives from different companies and industries across Europe. They were surveyed by means of an online questionnaire (the Pricing Maturity Indicator). The questions are designed to indicate the level of pricing maturity of an organisation by evaluating the performance across the elements of the EPP Pricing Framework.

Most companies  are stuck on the first level of pricing: the price list maintenance. They'll sell any goods or services to any customer at any price. Some corporations have reached level two, transactional control. At this level, the right goods are sold to the right customers at the right prices. This is achieved by means of a number of successful margin optimisation projects. Rare are the enterprises that reach Full Value Capture (level 3). This involves greater segmentation of the customer base and seeing overall solutions at value-based prices. Here, the pricing process is fully integrated in the commercial organisation. An absolute minority of companies has reached level 4, Profit Optimisation. This includes rethinking the solutions and revenue model in order to capture more value for the customer and increase profitability for the company.

Pol Vanaerde, EPP president: "Pricing, one of the most important sales and profit drivers, spans multiple business areas and functions, including sales, marketing, finance and product management.  Unfortunately it is not always equally well integrated and managed. European companies would benefit from investing in developing their pricing maturity.  They will perform better in their markets, capture more value from their innovations and increase their profitability."

Pricing is still handled in an immature way by most companies. There is a big contrast in the different kinds of the industries. High Tech respondents have the highest actual pricing maturity. 43% already work on level 3. Machinery and equipment, the most represented industry in this study, have the most realistic perception of pricing maturity with the vast majority performing on level 2. The Fast Moving Consumer Goods and Retail on the other hand are working 100% on level 1. Their two biggest challenges lie in gaining control over discount practices and in making optimal use of the large amount of data gathered from customer transactions.

Pricing is a matter too serious to be handled by guesswork. It is too much regarded as a project rather than an embedded function in the commercial organisation. The power of pricing as a profit driver still seems to be underestimated. Therefore it is crucial for companies to invest in developing awareness of pricing across their organisation. Crossing the pricing chasm remains the biggest challenge for European companies and organisations.

Download the full report here.

For more information or to arrange an informal discussion on the issues raised in the EPP European Pricing Maturity study, please contact project manager, Nicolene Barnard : Nicolene.Barnard@pricingplatform.eu or Pol Vanaerde, president & founder of EPP pva@pricingplatform.eu.

1 comment:

Pol Vanaerde said...

This study proves that European companies are working hard on their pricing maturity, but also that there are still lot’s of work to do. Last week, I discussed in Stockholm again progress with enthusiastic cross-industrial pricing professionals their path forward. Everyone went back with lot’s of energy and a path forward ! Keep improving, happy to support with EPP. Pol