Monitor recently conducted a benchmarking study of more than 200 companies. The study sought to measure the impact of pricing strategy and pricing execution on profitability and revenue growth. The results provide compelling evidence that the ability to manage pricing strategically can be a source of competitive advantage that drives superior financial performance.

Gregory Unruh introduces a passage about the price of critical resources from The Price of Everything: Solving the Mystery of Why We Pay What We Do, by Eduardo Porter.

With so much money at stake, it’s hard to understand why so many companies neglect pricing, leave it to the sales force, or rely on lower level analysts instead of moving it onto the CEO’s agenda. If your company’s view of pricing isn’t high-level and cross-functional, we believe it’s wrong.

Our research has consistently shown that pricing has up to four times more impact on profitability than other investments. If a business aims to create more value for its shareholders and customers through smarter pricing, the CEO must lead the way.

What if you could use the Web to return to the old-world traditional markets where merchants sized up every customer and quoted an exclusive price to each one? You can. Rather than eliminating sophisticated pricing strategies, the Internet actually empowers them.

Actively pricing products across their life cycle is increasingly important, particularly in innovation-intensive industries. Failing to do so may forego potential profits or even destroy value.

Many companies have a significant opportunity to improve their top- and bottom-line growth by improving their processes and execution on pricing. As these authors point out, senior management teams must summon the analytical skills and courage to confront their reluctance about changing prices and align their pricing more closely with the value of their products or services.

CEOs are often the last defense against unrestrained discounting that degrades margins and destroys value.

Seth Levine offers some ideas on pricing models.

It’s said that timing is everything, and that rule certainly applies to pricing. An often overlooked factor in driving purchase decisions, timing can be applied to nearly every pricing approach. In this white paper, the authors describe a variety of options: from stretching out the elements of a purchase decision to bringing them closer together, from changing prices dynamically over time to setting time limits on discounts. Companies that take advantage of these opportunities can drive overall profit through improved discounting, cross-selling, upselling, bundling, and unbundling of offerings.

There is a fundamental 'profit disconnect' in business today. Companies work to bring a product to market by investing significant effort and money in research and development, distribution, and marketing strategies. But when it comes to setting a price - how businesses get compensated for their hard work and financial risk - most companies drop the ball. Critical pricing decisions are often made using arbitrary 'this is the way we’ve always done it' methods. Companies are shortchanging themselves every day.

One way to survive online price wars is to avoid them altogether. Covert pricing skirts the online dust-up by surreptitiously offering short-lived promotional prices to micro-segments of customers. To ensure wins are not one-time events, the promotional prices change constantly—as do the targeted customers.

Your company has developed a new product that you think will be a winner. A lot of money has been poured into research and development, analysis of the competition and advertising. But there is one key element you may have overlooked: What do you charge for the product? Wharton marketing professors Jagmohan Raju and John Zhang say companies frequently don't put anywhere near as much thought into pricing as they should. In their new book, Smart Pricing, Raju and Zhang argue that firms ought to engage in innovative pricing to achieve maximum profitability, and they show how companies like Google are doing just that. (Podcast with Transcript)

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.