Inflation? Here’s How To Get Smarter On Pricing Strategy

Many CEOs haven’t tried hard to raise prices for a decade in the low-inflation environment that has prevailed. But in today’s inflationary times, they need to learn – or re-learn – the necessity to boost prices and the power that can be inherent in doing so.

At Chief Executive’s recent summit for CEOs of PE-backed companies, Brad Soper, a partner in Simon-Kucher & Partners shared pointers for today’s new era of pricing. The full video of the session is above—but here are a few takeaways from the session:

Get what you deserve: CEOs have grown accustomed to throwing in goodies – improved customer service, IP in products and so on – for nothing. “There’s a lot that you and your companies do every day to deliver better value, but when you think about the tradeoff, the value capture, the money you keep at the end of the day – is that balance right?”

Harvest what you post: Even when they increase prices, Soper said, “Companies aren’t very good at getting” the hikes. Surveys have shown two-thirds “don’t even achieve half of the price increase they went after. They might not have lost volume, but in a world of inflation of four to five percent, you have to shoot for [price increases] of eight to ten percent if you really need three percent.”

Make pricing a priority: “You can actually get ahead of this. Prepare; communicate price increases; and monitor them in the background. Provide incentives to go after them … If it isn’t the topic of regular executive meetings, and a standalone topic, you’re not focusing on the right things.”

Try these tactics: Target certain “customer groups and product categories” first. Start “inserting annual price escalators or adjust prices in new contracts.” And “create a shiny new object; sunset the old one; and force migration to the new one.”