Competition-Driven Pricing Could Derail Profitability

ByDeborah Austin Pricing professionals would fare better studying customer demand and value expectations rather than competitor activity, suggests the Professional Pricing Society (PPS), Atlanta, a global pricing management association. Competitors' poor pricing commoditizes the marketplace, which is a pricer's biggest pain point, said 52% of respondents to a recent PPS survey. And increased customer haggling is driving standard pricing "out of control," said 40%. But pricers expend too much energy trying to match competition -- which can hamper profitability and the ability to capture value in the long run, says PPS President Eric Mitchell. Instead they should manage pricing more strategically, analyzing past customer buying behavior before setting new prices. The survey showed 53% of pricers still use spreadsheets to do pricing; 28% use ERP-based software or in-house solutions; and 9% use new pricing-optimization and revenue-management technologies. "The next logical step is to integrate pricing as a strategic capability into the value chain," says Mitchell.