Pricing and Profitability Management: A Practical Guide for Business Leaders

Common Obstacles to Pricing and Profitability Management

In a 2004 study, AMR Research found that fewer than 3 percent of companies effectively managed, communicated, and enforced prices.³ Why? Because pricing, done correctly, is an extremely complex undertaking that requires a group of trained practitioners to view the business through a unique lens.

While executives may understand the benefits of improving their organizations' capabilities, the obstacles they face may seem insurmountable and can create institutional inertia. Many apparent barriers simply reflect the demands of pricing management itself. Other barriers reflect the natural confusion of an organization that lacks the structure and the personnel to handle the new strategic approach. A few of the common impediments follow.

Daunting Complexity

Pricing is an intricate and interdependent competency that affects all levels of an organization and the market it serves (including customers and competitors). At any given time, an organization must ask itself and address a multitude of questions:

• How can price be used as a competitive advantage, and how can we achieve results as quickly as possible?
• How do we position a price with our customers, and how do we differentiate our offering?
• What should our value propositions be for each customer segment?
• How does our product portfolio match the needs of our customers?
• What do we have to do to meet the promises made by our executives and our sales force, while still delivering ...