Pricing is the language of business. Through pricing, companies tell customers which products have the greatest value or when costs have gone up. Through pricing, companies can "ask" customers to change their behavior. A comprehensive "pricing fluency" program for the whole organization focuses on improving the pricing model with better policies for how prices are set, and improving the pricing platform for organizational implementation. The payoff: sustainable revenues that are 1 to 3 percent over those of competitors.

Effective pricing and profitability management depend on coordinated efforts within six areas of competency: pricing strategy, pricing execution, organizational management and governance, price analytics and optimization, pricing technology, and tax and regulatory considerations. Each of these areas, as described below, plays an important role in a company’s ability to set and enforce profitable prices.

Most companies need to lower prices in a downturn. But the range of outcomes can vary widely. And pricing decisions made now are likely to affect customers' perceptions for a long time to come. What matters most is how effectively companies manage pricing.

Pricing software can spot pointless discounts and other profit-killers, but it isn't cheap.

The issue of pricing sometimes feels like a Sisyphean task. It’s hard work to push price up a hill. Before you can reach your goal, the rock tends to fall back down. The potential value erodes, often cannibalized by excessive discounts, generous payment conditions or free-of-charge services. For all the work of setting a high price, companies rarely achieve that price. There is a better way.

When does pricing become a competitive weapon in the corporate arsenal? Execution that is consistent, sustainable and easily repeatable allows organizations to implement pricing strategy effectively. Such execution makes companies more agile in competitive circumstances and more highly responsive to changes in market conditions, thereby benefiting the bottom line.

Keys to sustainable pricing execution include a comprehensive pricing process, effective organizational design, robust tactical capabilities and aligned people. Here’s why:

* A comprehensive pricing process guides your stakeholders on how and when to act, and provides a mechanism for feeding information and perspective into decision-making
* The right organizational design — whether centralized, decentralized or a hybrid model — enables you to tailor processes and decision-making to your company’s needs
* Strong tactical capabilities and a culture that embraces pricing provide critical support for these other structural pieces

Many executives view the path to sustainable pricing as a labyrinth. Certainly it requires significant effort and changes in thinking. But this paper aims to help ease that path for you through a clearer understanding of the decisions and other key factors that can make pricing a competitive weapon today.

In one of a series of interactive presentations, McKinsey director Rob Latoff offers insight into the industry cost curve, a business school classic for understanding pricing. By bringing discipline and a practical set of definitions to bear, this framework can be applied to real-world, competitive markets.

Too often, industrial companies are leaving cash on the table – and missing opportunities to cement customer loyalty and boost repeat sales of their equipment – because they base decisions about bundling and pricing their services on anecdotal information. We offer a systematic approach to examining markets, leading to a much more informed perspective on the opportunities and risks in bundling and pricing services.

Consumers get hit with the price-increase hammer every time they drive past a gas station. Harvard Business School professor John Quelch offers tips on how marketers can cope with inflation and consumer sticker shock.

A quick guide to handling a price hike without hurting your business.

Strategic pricing is one of the most powerful sources of profits and growth. Yet, in recent years, it has been the least exploited driver of shareholder value. Few manufacturers review their pricing systematically. Most set prices reactively. Some extrapolate from history, and for others it's just a hunch.

Juggling thousands or even millions of price points calls for common systems, greater transparency in performance, and an organizational balance between centralization and decentralization.

Companies have more power to create value through pricing - including raising prices, even under weak economic and strong competitive conditions - than many realize. Companies that focus their organizations on what we call precision pricing typically boost EBIT margins by three to five points, and sometimes by as much as ten points. Moreover, they score these gains fast. The key is to conduct continuous, systematic analysis of four levers: value-based product pricing, mix management, unbundled service pricing, and after-market pricing.

Kent B. Monroe talks about guidelines and basic rules to follow for developing and maintaining an effective organizational approach to solving pricing problems.

A SlideShare presentation covering a wide variety of pricing issues.

Now that pricing is seen as a primary contributor to better performance, many companies are applying advanced technology and setting up new teams so they can price more effectively. But that's not enough. Here's how to make pricing a sustainable part of management's strategic repertoire.

It's every executive's worst nightmare: You wake up one day to find that a competitor is selling a product much like yours at a much lower price. Matching the lower price would devastate your profit margins, but ignoring the low-price gambit may prompt your customers to flee. Don't panic. Taking on a low-price competitor requires a careful rethinking of how your company does business. To start, read our Crash Course on "How to Beat a Lower-Priced Competitor" to learn about the strategies that will make your product more valuable to buyers. We've also summarized the wisdom of five strategy gurus so you'll have additional ideas on how to combat low-cost competition. To hear from managers on the front lines, we interviewed executives from Time Inc. and Sony to find out how they stay ahead of their low-cost rivals. Lastly, we looked at how some products compete effectively against low-price equivalents by raising prices and heading upmarket.

What does the net price per each individual product look like over time at your company? If it is not going up, the business is headed for trouble.

The profit equation has three variables: price, volume, and cost. Of these, price is the most common candidate for manipulation since nothing else need change to produce profits for everyone, provided everyone changes prices together.

Editor's Note: written in 1970...

Most companies fail to capture all of the opportunities for generating growth, profit, and competitive advantage through pricing. What's more, many companies do an especially poor job of managing pricing as they come out of an economic downturn. Pricing for the recovery is an opportunity they can't afford to miss. The authors discuss how companies can pull the appropriate pricing levers for the cost structures, competitive dynamics, and demand elasticities of their products at various points in the business cycle.

Depending on the pricing problem the company is trying to solve, there might be different pricing processes and software categories, such as:
* price execution
* price enforcement
* price visibility
* price optimization
* pricing management

Pricing may well be the weakest link in the value chain. It has such potential to accelerate revenue and profit growth, yet it is so clearly under-managed at consumer and business-to-business companies alike. There are opportunities for improvement in five areas of pricing strategy.

Executives often suffer from pricing myopia. They don't see the freedom they have to use pricing to enhance the performance of their businesses and even create competitive advantage. Because of their distorted or limited vision, they underestimate their power to manage pricing, mistakenly believe that their customers are paying the amounts stipulated by their pricing guidelines, passively accept the prevailing approaches to pricing in their industries, or neglect to consider how they could use pricing to change the competitive game.

Pricing decisions can become significantly more manageable when supported with effective pricing research. The key to it, like with any research, is designing it right and executing it effectively. This article offers a framework, entitled the "5 Cardinal Rules of Pricing Research", that will help your company make those critical pricing decisions, but also make you more effective in providing the answers.

Suppliers of solutions-integrated bundles of related products and services-often don't get the price premium they deserve. That's because setting the right price for a solution is no easy matter: price too high and customers will meet their own needs; price too low and suppliers won't get paid for the value they are delivering and the effort that went into it.