BONN, Germany--(BUSINESS WIRE)--65 percent of the companies are not able to charge the prices they deserve for the value their products and services deliver. As a result, they lose 25 percent of profits. Rather than focusing on profit, 46 percent fight price wars to gain volume and market share. And when companies finally bring themselves to raise prices, they only get half of what they planned. These are the key findings of the Global Pricing Study 2011 conducted by strategy and marketing consultancy Simon-Kucher & Partners. The pricing experts surveyed more than 3,900 high-level decision makers from all major service and manufacturing industries in Europe, the US and Asia about their profit culture, pricing power, inflation and profit outlook. The study results show that companies underestimate the inflation threat and are badly prepared when they need to increase prices. But inflation is inevitable. “To secure profits, managers need to make their company inflation-safe. Using the inflation rate as a benchmark for the price increase target is in most cases the wrong strategy,” says CEO Georg Tacke.
Pricing power is the ability of companies to get the market prices they deserve for the value they deliver to customers. Only one-third has sufficient pricing power and knows how to turn value into money. The weak performance cuts profits by one-quarter. The chemical industry and transport & logistics have the lowest pricing power. Companies in Poland, the US and France achieve more often market prices that are in line with the value they offer. “The primary drivers for high pricing power are customer value and brand.”
46 percent of companies are still engaged in price wars. The vast majority of managers blame their competitor for triggering it. Japan is by far the most militant price war market, followed by Italy and Spain. Simon-Kucher advises managers to strive for profit, not for market share. Price is the strongest profit driver.
Most companies are only able to get half of the target price increase. “To cope with the inflation risk, pricing know-how differentiates the smart companies from the low performers.” The better the pricing know-how, the higher the pricing power, the higher the profits. 25 percent higher profits are proof enough.
The management summary of the survey is available upon request. For further details read the press release: http://www2.simon-kucher.com/index.php/us/news/press-releases.html or contact Claudia.Schulz@simon-kucher.com, +492289843372.