Pricing with Confidence, 2nd Edition

CHAPTER 1Rule One

Price for Profit

Inflation complicates every aspect of pricing. Rule One is about using price to increase profits. Profits result when an organization understands how their products and services create value for their customers. Higher levels of profit come when a firm sets a fair price based on that value and executes those prices through a salesforce that is prepared to capture, not discount the set prices with customers.

For the first time in decades, persistent inflation has become an urgent short-term consideration for companies around the world. Our view is that while inflation certainly complicates every aspect of pricing, it also represents an ideal opportunity to make long-overdue changes to pricing practices. For that reason, struggling with short-term inflation may have some long-term benefits.

Inflation has propelled the issue of pricing from the backroom to the boardroom. For all the pain it imposes, inflation actually has an unseen benefit. It's that the attention of C-suite business executives will never be more focused on pricing than it is right now. C-Suite leaders are acutely attentive to the unavoidable fact that inflation has an unforgiving impact on the profits of companies that fail to manage it with agility. When input costs rise drastically, an enterprise's profits will take a dive unless it can quickly pass along price increases, and when it comes to inflation, nimbleness is the imperative.

Most analysts agree on two things. One, ...