More Than A Billion Dollars – ROI of Pricing Projects

Article written by Frederico Zornig and published in the Journal of the Professional Pricing Society (PPS).

My first experience with a pricing project happened in 2002 when I worked for Johnson & Johnson. After a global initiative by the company to form Six Sigma Black Belts with a focus on pricing during 2001 in the USA, I took on the responsibility of leading a very comprehensive price management project involving several processes such as the implementation of a new commercial policy, new price list (based on a new pricing methodology and no more mark-ups), new order capture system by the sales team and a simulation and negotiation tool with customers, alongside an ERP change in company (The new ERP was being implemented almost concurrently with the pricing project).

Before that moment in my career, I met pricing through Professor Kent Monroe during my MBA at the University of Illinois at Urbana-Champaign in 1998. Shortly after completing the course, I resumed my career as an executive at Johnson & Johnson in a program called IRDP (International Recruitment and Development Program) where I was exposed to some areas of the company and where I also started to get involved with pricing to the point that my immediate superior at the time, Joe Mir, understood that I should be part of a select group of 20 global executives who would certify as black belts with a focus on pricing.

Returning to the pricing project, the result obtained for Johnson & Johnson was excellent. We brought, after a year of implementation, a growth of more than 20% in a mature business unit, which came from some years with very modest growth, if any. And a good part of this growth occurred through an improvement in prices practiced in the market, since volumes were practically stable. The impact on gross margin was over 10 percentage points in that year alone.

I received an award from the company the following year for the results of the project and also a promotion to become the company’s sales and marketing director in Brazil. I also stayed at Johnson & Johnson for another four years. However, after having seen in practice the theory learned in the MBA pricing classes being applied and the level of results it brought, I soon imagined that it would be possible to replicate the way we developed the project at Johnson & Johnson with any other company in the market. It was enough for me to take the knowledge and experience acquired so that along with a team of professionals from the client company we could join forces to structure solutions that could impact the business in the same way that I experienced as an executive.

So, for the market, Quantiz was born right after I left Johnson & Johnson in 2006. However, in my mind, Quantiz was born during my first experiences with pricing, maybe I even dreamed of a consultancy in the area watching MBA classes back in 1998, because almost all topics were interesting and new to me. So much so that the company name (Quantiz) was registered in Brazil in May 2001, but I left it inactive until 2006 when I understood I had the maturity and experience necessary to lead and start a new business. Besides, in this period that I served as an executive, I managed to make a financial reserve which allowed me to keep supporting my family and I was also able to get involved with academia and professional organizations.

I got a place at FGV / SP to teach pricing for several MBA courses, especially retail, where I taught numerous classes between 2005 and 2017. I was also able to present pricing for other courses at the university. Sometimes as an independent subject, sometimes just one or two classes within a marketing course. But it was important, for a new consulting business, to have this link with academia. Not to mention that there is nothing better than trying to teach in order to learn and get deeper into any topic.

In this same direction, always seeking to update myself, I started my relationship with the Professional Pricing Society (PPS) of Atlanta / USA in 1999 as a member. I did some CPP (Certified Pricing Professional) modules, three to be more precise, during the early 2000s still through Johnson & Johnson while the company was willing to invest in my knowledge in the area. I was a little removed from pricing in 2003 when I took over the commercial management (Marketing and Sales) at Johnson & Johnson and for that reason, it made no more sense for Johnson & Johnson to continue paying for my courses at the Pricing Society.

But PPS played a key role in my decision to start Quantiz. First, because I was able to follow the evolution of the pricing area in the USA. At each edition of the event, there were more participants and executives with higher positions in the organizations. If twenty years ago it was unusual to find pricing VPs, today it is something normal at the entity’s events. Including many as speakers, sharing their experiences and best practices.

As I mentioned before, it was almost four years working in the role of director at JnJ, and in the last few months, it became more and more evident that my path would not be to follow as an executive, but as a consultant. I wrote several articles and a book on pricing that was edited and published by NOBEL, which is called “Get the Price Right and Increase Your Profits”. And then, still in 2006, the biggest career decision, I decided to focus solely on pricing. I left Johnson & Johnson at the end of that year and started Quantiz for business.

Importance of Price in a Company’s Results

Many studies have already demonstrated the importance of prices in company’s results. One of the best-known ones was carried out by the consulting firm McKinsey in the early 2000s using the published balance sheet of the 1,200 largest global companies at the time. In a simple but interesting way, he estimated the impact on the net profit of each of these companies and the average of all of them considering variations (improvement) of 1% in each of the main levers of business results: sales volume, direct variable costs, fixed costs, and prices.

The study consisted of varying positively by 1% one of the four lines of the balance sheet above while keeping the others unchanged. The results they found were revealing. While an increase in sales volume, reduction of variable costs, and reduction of fixed costs showed gains in profit of the order of single digits, the capture of 1% more prices, in the average of these companies, brought a gain of more than ten percent in net profit. It does not matter so much the percentage values themselves, as they vary according to each company, but the order of magnitude, where the price lever is much more powerful than any other variable for the impact on the result.

I reinforce then that the main lever to improve the results of a company is the price that it practices. However, in the market, what I hear the most is that we have to gain volume or Market Share or reduce costs. When I ask about prices, the answer is often that the market makes the price.

In fact, I participated in a round table organized by a business magazine a few years ago with some of the country’s top executives and one of the panelists had an interesting discussion with me claiming that the price is the market. Incredible, this thought came from a business leader representing a company that had more than 40% market share at the time. With this level of representativeness, my question for him was: But who is the market? Even with smaller stakes than this, many companies need to set prices in the market and influence competitors and not be held hostage by unthinking reactions or act as simple followers of competitive actions.

I would also like to point out that every company should assess how a 1% price improvement could bring additional results to shareholders. It is evident when performing this exercise that companies that work with tighter margins, such as wholesalers, manufacturers of commoditized products *, sectors that are highly dispersed with several competitors would benefit much more percentage than companies that already operate with very healthy margins. Anyway, captures of 1% or more, from my experience in these more than ten years of consulting projects, are very feasible and are available to almost any company that assumes the desire and has the conviction to implement more price management strategies.

* Commoditized product is a nomenclature that I use to distinguish something very common, but not necessarily a commodity itself. A commodity is soy or oil for example, whose prices are given by an exchange in Chicago or London. Another thing is the commoditized product, it has several similar or substitutes, but they can still be differentiated in some way, such as brand or quality.

Projects Generating Value

Selling the first project was not easy! It took me five months making visits, contacts, proposals, and the answer was either no (almost always) or some counter offer at the proposed price that I’m even ashamed to remember. But like everything in life when we have clear goals, with resilience, I continued to believe that someday, someone would believe in the proposal that I offered and I would be hired to do a project.
This first job came with the help of a friend who put me inside the company he led at that time so that I could finally deliver my first project as a consultant. And here I am, 14 years later and more than 140 projects delivered, so that I could write these lines to share some of the results and benefits that pricing projects can generate based on these experiences.

To have an idea of the impact that Quantiz had on the market, we surveyed all the projects carried out, which today exceed one hundred and forty, and grouped among the projects that did not work, either because they were not implemented, or because they fell short of the expected result or because they did not move forward. These failures, which I remember more than the successes because the lessons are harder, happened in 22 out of 140 clients. In other words, around 15% of our projects came to nothing.

My first failure (and I put it in the first person because although I was not alone, as a leader, the responsibility, in the end, is always mine, especially if we fail) happened in 2010 when a client of ours, in the paint business, decided not to implement a project after the CEO’s perception was that we would have too much risk of loss of volume and Market Share for what he considered a small financial gain. Also, there was a targeting failure as its goal was to be number one in the market, and losing any volume at that time would go against its goal. It is curious that in this client, the Commercial Director was the one most concerned with margins. Most of the time it ends up being the opposite, but it is excellent when the commercial area understands the importance of margins for the success of the business.

Anyway, apart from the twenty-two projects that did not work, there are still 120 of them left. Of these, six went no further than a diagnosis. We are often hired to raise opportunities and if the client sees the investment in the project as worthwhile, we close an extension of the contract so that we can proceed with the project. In fact, just under half of our projects start this way. But, to some, we were not able to show potential gains or their pricing departments were so evolved that we did not see how we could bring improvements that justified new investments. These cases occurred in only two customers and are two companies that are known to be well structured in pricing.

Hence, 114 projects remained. In all of those remaining, we were able to develop a project, most of them, 58 in fact, were implemented along with our clients. These 58 projects are the ones that we were able to accompany to the end and I will present the average impacts generated so that you can have an order of magnitude of what pricing is capable of accomplishing for a business.

Of course, factors such as level of competitiveness in the sector, product or brand differentials, pre-project pricing stage, quality of the project team, and execution capacity, among many other variables can end up affecting results. Sometimes competitors make our lives a little more difficult as well. In others, we realize that they do nothing, which helps us achieve better numbers.

To start evaluating the projects’ results, we take the average annual revenue of these clients that we monitor the results at the time of the project, without any monetary correction, which totaled R$ 3.5 billion. Bearing in mind that these are values that have been available since 2007, that is, currently, on average, they should be something much larger than that in nominal terms given Brazilian inflation over this period.

The average results obtained in terms of increased contribution margin generated by the projects, measuring total contribution margin generated in reais (or dollars) in the current year versus previous year for same stores (or same items) and/or measuring the impact on the total contribution margin in reais comparing a pilot area with a mirror area, it was between 0.5% (the lowest result we consider successful for companies with commodity products) and 14% (the best result obtained, so far).

Translating this to profits, these results generated, on average, an increase of 2.79% in the company’s revenue linked with a high degree of confidence in pricing initiatives. That is, for each R$ 1 billion in revenue, we were able to generate a gain of R$ 27.9 million in gross BRL (Brazilian reais). Multiplied by the average annual revenue of the customers that we measure these gains, we have an annual impact of practically R$ 98 million in total (R$ 3.5 billion x 2.79%)!

Multiplying by the number of years we have been in the market, it would be something like R$ 1.4 billion reais generated by our projects over these almost 15 years. Besides, almost another half of the projects we did were implemented without our participation or results from monitoring and we know our clients approved them because we are either hired again or refer us to other clients. Therefore, we can imagine that similar results must have been obtained by them, which would lead us to another amount close to R$ 1.4 billion generated in these years of work! Almost R$ 3 billion in additional profit generated in total!

At the time of writing this text, the dollar is worth just over R$ 5.00. But during these years that we evaluated our projects, it varied between R$ 1.50 and R$ 4.00 (end of 2019), as these higher values of the dollar occur only now in 2020. The average dollar of the period of the analysis is a little below R$ 3.00. So, converting the almost R$ 3 billion reais generated in our projects, we can assume that we managed to generate just over USD $ 1 billion in additional profit for our clients in all these years.

Some of you may be thinking, the total looks like a good value, but dividing by the number of years and the number of customers, it doesn’t sound that interesting. Some initiatives can have much greater impacts. And you are probably right to think that way. The difficulties of being able to capture value in pricing projects are numerous. First, we don’t control the whole process.

An important part of our prices ends up being interconnected with the prices of our main competitors. If they start a price war during the project, or even at any other time, what we can capture is difficult.

Another relevant aspect is that products that are heavily influenced by the cost of raw materials, end up being held hostage by market fluctuations related to supply and demand that overrides a lot of what pricing can or cannot do. Finally, in some companies, there is a huge difficulty to overcome barriers to change, and in some of them, their own teams end up boycotting the initiatives.

Even so, most of the time, as shown above, we achieved results and relevant impacts for the business. Wouldn’t it be interesting for your company to be able to count on 2.79% more revenue directly impacting this amount on your absolute contribution margin in reais (or dollars)? Most of the CEOs I talk to think so.

It is also important to note that the focus must be on the absolute contribution margin in reais (or dollars). I experienced a negotiation where the CEO wanted to increase his percentage contribution margin from 27% to 30%. I said that this would be easy to do because simply by raising prices, the percentage margin would reach 30%. He quickly understood and replied about the volume. And then I answered that he was correct, and that is why we need to measure the absolute margin and not the percentages. Interestingly, the project at that company resulted in a loss of percentage margin, reaching 25%, but with an absolute margin gain of just over 7%. In other words, some prices fell in order to seek more volume in some lines, compensating with others products becoming more premium, resulting in busier factories and better total results.

Strategic Benefits

Pricing projects don’t just affect financial results. Several aspects can be improved in a company through price management processes. I will present a list of them detailed briefly so that you can evaluate in your own companies which could be better worked to obtain qualitative gains in management. Pricing does not only bring quantitative results but also qualitative ones. The ones that are presented are not exhaustive. There are many other qualitative benefits that one can think about when a company has a clear focus on implementing a Strategic Pricing Management, but I believe that just introducing a few will be good enough to start thinking about all the possibilities.

Correct Price Positioning

Positioning your products on the market is a constant challenge as consumer preferences change, competitors’ prices fluctuate, inflation forces price adjustments, margins of sales channels can vary significantly, and in the case of Brazil, in particular, our tax model leaves the situation even more complex.

So, given all the variables we have to control, what seemed easy before ends up becoming a complicated task. Many companies try to simplify by assuming an X% standard above or below the competition, but this system eliminates their strategy and their products end up being held hostage by the prices of competing brands, which in most cases is harmful to their business and only favors your competitor. That, of course, when he knows what he’s doing. Because if he is also lost or following you, the situation should not be good for any of the players.

In this sense, a pricing project can offer clear methodologies on how to set prices, including adequate margins in the chain, positioning based on price ranges by channel or region, or even national prices if we follow a single price strategy. In this process, we can include surveys of customer perception of value, if the product, brand or service has differentials, of course. We can also use mathematical modeling to find optimal prices or exponential positions for product lines with “good, better, best” variants, among other possibilities.

Price positioning also reinforces the brand’s Pricing Power. Knowing how to position yourself in the market and execute your pricing strategy well allows your company to avoid unnecessary price wars and educates the consumer about the value of what you have to offer. Therefore, knowing how to position your prices in the market can be a qualitative gain that ends up turning into financial results at the end of the day.

Business Strategy Reflected in Commercial Policy

I still remember one of our first projects when the CEO of a beverage company, explaining his strategy, told me that his company needed to stop being a brewery to become a real beverage company.

My response was quick, since the company’s entire discount policy was still stuck in beer volume. That is, if you want to do good business with us, buy a lot of beer that will have the lowest price.

In this scenario, your strategy would never be implemented in the market. Distributors and customers, in general, continued to buy more and more beer instead of other items in the portfolio to earn more and more discounts, rebates and bonuses.

By aligning our commercial policy by granting discounts mainly for the product mix (quantity of items) ordered and reducing the importance for discounts in the volume of beer, we started to achieve the sale of soft drinks, energy drinks, water, juices and other items produced and bottled by the company.

This is just an example. Our business strategy may have different needs. For example, I need to spread my sales, so it doesn’t make sense to differentiate the price a lot between large and small customers. The regularity of purchases is something strategic for our logistics, so I have to create some incentive for our customers to buy regularly and frequently to optimize my operation. I may have a strategy for reducing cash flow, so I can offer a good discount for payment in cash or by means of payment where the fees are lower. And so on.

At Quantiz we have a list with more than 20 incentives that we have used in several projects over time. Each company needs to define its strategy and then choose which incentives to offer to the market so that it can be executed. Think of trade policy as the link between strategy and execution!

Transparency in Commercial Policy

As we are talking about Commercial Policy, an important pillar for it to survive in the market is its credibility. It is useless for a company to define a commercial policy if the sales area negotiates everything as an exception or outside the established rules.

This type of behavior will lead customers to bluff all the time and in a few months after defining a commercial policy, your company will end up negotiating on a case-by-case basis, without a strategy behind it and remaining in the hands of what each salesperson thinks is the best strategy to do.

Therefore, giving the commercial policy full transparency is fundamental for it to start gaining credibility in the market. It may seem strange to many sales managers that it opens all avenues for the customer to know how to make a good deal with the company, but studies show that by making clear the negotiation limits that exist, buyers accept the rules and tend to do business more easily with companies that adopt this practice, as they remove the insecurity of not being doing the best business.

Also, if the incentives are well structured, for each discount offered there will be an interesting counterpart for the company and something valued by the customer. It is the typical win-win negotiation. It is excellent when we achieve this in the market. We gain credibility and trust from our customers, and that has value.

Reduction in Conflict Between Sales Channels

When implementing a transparent commercial policy in the market, in addition to the benefits that we have already mentioned above, another important component that can be defined is the role of each channel and their respective prices within ranges that do not make them compete with each other.

Evidently, in a much more volatile, agile, troubled, and uncertain world that we are currently experiencing, sales channels often end up mixing. Some companies, as a result, start looking for an omnichannel price guaranteeing consumers prices, if not equal, within a very close range regardless of the channel. This is also possible only with clear and well-executed policies.

But in most situations in Brazil, companies have different channel strategies by region. In one of our clients, for example, they had a direct sales force in the State of São Paulo with excellent coverage. If they left very low prices for wholesalers in this state, their direct sales would certainly be affected and they would end up migrating volume to the wholesaler, who generally paid lower prices than the final customer in a direct sale.

On the other hand, this same company depended heavily on distributors and wholesalers to get its products to more distant regions of the country, in states like Acre, Rondônia, and others. In these states, it made sense to offer aggressive prices so that wholesalers could take the products to more retailers in those regions where their own sales force was unable to adequately cover the market.

To increase complexity, we are currently faced with market places and companies selling over the internet at prices often much lower than traditional retail channels. If the company that manufactures these products does not want to see a price war between its business partners, it needs, through a clear commercial policy, to define appropriate margins for each channel and thereby establish its sell prices. In other words, the price management of the entire chain should be organized by the industry so that the value it offers to its end consumers is not lost in the sales channels.

Customer Segmentation

We just talked about how differentiating prices by sales channel is a way to segment the market. However, this is often not enough because even within a specific channel, we may have very different shopping behavior among the participants in that channel.

In general, in addition to quantitative segmentation, we should think about customer purchasing behavior. It is common to have at least four purchase profiles. The loyal customer, who is the one who values your company and does not press too hard for price. The price customer, who is just the opposite, that is, presses hard for price and is not very concerned about which company he will buy from.

We also have convenience customers. This is the one that does not press for price, because it has some urgent need, but little value for what it offers. Finally, the customer profile that grows the most in almost all markets is the customer who seeks the best cost-benefit ratio. In other words, it values differentials and quality but negotiates or seeks lower prices.

Therefore, knowing how to segment customers not only by their quantitative and objective profile but also for reasons of purchasing behavior are necessary to adapt their offers and prices for each of these segments. Each profile responds to different incentives, so the suggestion we leave is that the company needs to define a variety of solutions to reach the largest possible number of customers in a structured and organized way, maintaining control over which customer receives which offer.

Another way of thinking is to let each customer self-segment. For this, the company needs to build a menu of offers and let each customer choose the one that makes the most sense.

A client of ours in the medical equipment field worked in this direction. Customers had the option of purchasing an imaging machine at the lowest possible price, but without any additional services. At the other extreme of supply, in addition to the machine being able to be purchased for financing, it could purchase preventive maintenance plans, warranties, consumables and even outsource the operation of the machines themselves, and many combinations of options between these two extremes.

That is, each customer could choose the best way to be served. From the customer who just wanted a price to the customer looking for a complete solution to their need for imaging operations in a hospital.

Prices Defined by Perceived Value and Not Just by Mark-up

A company can choose from several methods to form prices. The most traditional and most used, based on our experience and based on research from major consultants, is what we call a mark-up. In this method, the starting point is the cost of the product and the manager defines the objective margin that he would like to obtain for his product, estimates a certain volume of sales and thereby manages to define the mark-up, which is nothing more than a factor that will apply to your purchase or purchase cost.

It is an easy method to use. It has additional advantages, such as the almost certainty that the margin obtained will be close to the adopted mark-up and a guarantee that it will have its costs covered. However, its greatest weakness is precisely to be directed towards financial objectives or goals within the company, ignoring competitors’ prices or perceived value by the customer (B2B) or consumer (B2C).

In this perception of value, it is precisely the great opportunity to capture greater margins for the products and services that we offer to the market. Whenever a company has a competitive advantage that is relevant to any segment in which it operates, there is an opportunity to price by understanding in a quantitative way what the value is perceived by customers and how much they are willing to pay for these advantages.

It is evident that to reach these values some kind of research with your customers is necessary. There are several research techniques to support a company to define this differential value and it is not the purpose of this chapter to explain them. The idea here is just to reinforce that the result of a pricing project can be a change in the way that companies price their products, adding more sophisticated methods and allowing greater capture of value for what is offered.

Sustainable Increase in Profitability

Price increases have limits. A common mistake is to believe that after a few rounds of price increases, even for differentiated products with low elasticity, volumes will remain stable or with minimal drops, guaranteeing a permanent increase in profitability.

The problem is that the market is dynamic and there are acceptable price ranges for any product. In other words, as we begin to approach the upper limit of this price range, we begin to put this strategy of consecutive price increases at risk.

For price increases, I speak of those real price increases and not just a replacement of inflation. Nominal price increases are almost expected annually for an inflation reset or some other adjustment in the tables, but real increases are those that go beyond just an inflation pass-through. Some involve a whole product repositioning, with new benefits or marketing campaigns. Others, however, are just a reflection of a new positioning found by some product line equation technique that finds positioning exponentially, for example.

In these cases, in the absence of research, such as a Van Westendorp, to support the new positions, many companies end up adopting a practice of trial and error, which is also valid. Dynamic pricing algorithms test consumer limits and responses all the time. The big mistake here is to ignore these limits and increase prices believing that the product, once inelastic, will always be inelastic.

All products have limits. A good example of this was the launch of the Apple X at prices of around US $ 1,500. Even with all the strength of the brand, Pricing Power, and loyal customers, they had a lower demand than expected precisely because they probably went beyond what many accepted. Of course, the price ranges are different by consumers, but it is clear that several have similar price ranges.

Whenever an inelastic product in the past begins to suffer from greater elasticity it is reason to be concerned. The entire pricing project needs to be sensitive to these limits to ensure that the results are sustainable. There is no point in going very eagerly to capture value without respecting how much our product, service, or brand can handle.

Good price projects focus on absolute margins, as we have already said, and this absolute dollar margin must always be increasing. A sudden drop in this indicator is a strong sign that something is wrong!

Alignment of Commercial Team Compensation with Company Objectives

A relevant aspect for the success of any pricing initiative is the alignment of the organization’s objectives with its employees, especially those of the commercial team.

We have tried numerous times to implement pricing projects, seeking to increase margins or improve profitability, since the entire sales team was commissioned. That is, it received a percentage of sales revenue, regardless of the margin obtained in that transaction. That is, any lost sale was one less commission and soon something to be avoided at all costs. Even if the cost of this was for the company to sell at a loss!
This is not a simple problem to solve. We often need to involve Human Resources or Legal to review employment contracts, remuneration rules, etc.

However, although it is something difficult to change and that can even lead to the loss of some good sales staff, I recommend it to any company that wants to embark on a pricing journey, ensure the alignment of incentives and remuneration of its commercial team with the objectives of the company.

Going further, the objectives should be common to the entire organization. Sales, logistics, finance, marketing … When we enter companies that already remunerate their teams with objectives associated with profit or margin, their implementation ends up being much easier.

I still remember in a commodities company that we operated a long time ago where we were received by the commercial area as saviors. They had adopted a remuneration model based on profitability a year earlier, but they were having a hard time bringing this increase, impacting the team’s bonuses and awards.

When at the kick-off, the president announced to his employees that our goal was to help them find opportunities to improve profitability, which would lead to more bonuses for the salespeople, we received a standing ovation! This only happened once, and it was one of the projects where the implementation went smoothly, with virtually no inconveniences and the results were beyond what everyone expected!

Systematic Price Optimization

From the first projects I did as a consultant in 2006, 2007 until today (2020), I see that the big transformation in solutions happened in the technology part. Large databases, more information, business intelligence systems, open-source analytical tools, pricing algorithms, among other transformations, have opened up a range of opportunities for increasingly robust, responsive, dynamic, and systematized solutions.

The use of Excel, which was the tool in which I developed price simulators, analyses, graphs, among others, simply does not serve anymore. It has important limitations with larger bases, automation, etc. And the speed at which this tool stopped serving was amazing.

Currently, projects need to be developed using Microsoft PowerBI with adaptations programmed in Python using statistical functions brought from R (statistical software). Others, even more robust, require systematic pricing algorithms using Artificial Intelligence in the cloud with Machine Learning. In the case of Quantiz, we use Azure from Microsoft, but it could be from any other company that offers this type of platform.

In other words, talking about price optimization was always something very distant in the mid-2000s when I started doing projects, today, it is still trivial for many companies that have the data, culture, and investments necessary to reach this level of sophistication.

From the consumers’ point of view, it is increasingly clear that they accept dynamic prices as a way for retailers and companies to offer their products and services. Otherwise, Amazon wouldn’t be what it is today!

Besides, another advantage in this type of systematization is the elimination of human error. We cannot manage thousands of items with all possible combinations that can be done with a spreadsheet. We need to use the alternatives that are currently available.

Finally, the values involved in this type of solution have been falling for ten years. That is, in the past, we could say that high investment was the reason for not doing a systematization project. However, with the values practiced today by several suppliers, even this excuse can no longer be used.


Strategic Price Management

If you got this far, it is because you liked what you have read so far. And this topic sums up everything that was said in this chapter. For any company to reach a stage in which it will be doing Strategic Price Management, most (if not all) the aspects that we approached need to be accomplished.

Having robust processes for defining strategies, business policies, customer segmentation, value surveys, systems, compensation aligned with objectives, among other activities, are not easy or simple tasks. Unfortunately, many leaders of organizations still see prices as tactical or trivial, something that doesn’t deserve all the attention of the C-suite.

As I mentioned at the beginning, I have been working with pricing for over twenty years. I participated in business transformations based on strategic price management that allowed companies to change the level in terms of brand recognition, market share, profitability, price positioning in the market, Pricing Power, among many other benefits.

Finally, I want to invite everyone to rethink the strategic importance they are giving to price management in their companies. There is probably no area in the company that has greater potential to unlock quick and consistent gains for the business. Think strategically. Think Pricing!


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