Pricing is a process, not an event. This mantra is important for companies who think pricing is something they do annually, when they update price books, or in special circumstances when they add a fuel surcharge. But pricing is happening all the time, whether or not you are participating in it, because pricing is the monetization of value, and your value changes with the market.
Decades ago, many companies could get away with treating pricing as an event, but the acceleration and globalization of business has destroyed that paradigm. Within the past 12 months, market volatility has further emphasized the importance of pricing agility as an ongoing business process. Inflation, especially in energy and commodities last year, left many companies flat-footed. Then, just as they were getting around to their price increases, the economy tanked and pricing power diminished or vanished. Now many of these companies are just getting around to unbundling offerings, being more creative with financing, or just being more generous with discounts.
Unfortunately, inflation is likely to be back soon, and these companies will again find themselves at odds with the market, with lower and revenue and much lower profit than more agile companies who can ride the market waves.
We’ll talk about how to ride the market successfully in an upcoming post.