McKinsey&Company see well-managed companies already recognize the critical role pricing plays in driving performance. A foundation that underpins excellence in pricing is the key to realizing its potential. Over the past two decades, most companies have recognized the bottom-line impact to be gained through effective pricing. Yet awareness by itself is not enough. Tapping the full promise of pricing requires an infrastructure to drive real and sustained pricing performance. With such a foundation, you have the ability to establish and strengthen pricing activities by creating deliberate decision processes, a specialized pricing organization, mechanisms that appropriately measure and reward pricing excellence, and robust support tools and systems.
Successful companies deliberately build a strong pricing infrastructure that underpins and sustains pricing excellence. They start by focusing on the most critical pricing processes, then consider who “owns” and drives the organization’s pricing profit centre. A constant focus on performance management inspires managers to improve their pricing performance in the context of the overall business strategy, while holding them accountable to meet or exceed expectations. Finally, systems and tools facilitate pricing processes, help people in the pricing organization raise their game, and support performance management. Implementing these elements in this order—processes, organization, performance management, and systems and tools—increases the likelihood that pricing-infrastructure investments will have an enduring impact.
The following elements are key to building a better pricing infrastructure:
- Well-defined pricing processes
- High-calibre organisational elements
- Performance-management systems
- Pricing systems and tools