KPMG in the UK is today launching a collection of articles under the title Unlocking the Potential of Pricing.
In a recent KPMG survey, board members from range of industries said that poor pricing decisions leave at least 10% profit on the table but why should this be the case and who is ultimately responsible for unlocking the potential of pricing? KPMG explores how companies can take control of their pricing strategy and implement a positive pricing culture leading to better pricing performance.
One of the most interesting observations in this comprehensive report was the concept of creating a separate pricing function and Chief Pricing Officer (CPrO). Most companies have at some time declared pricing as a high priority but the trouble often starts when they try to identify who will be responsible and accountable for improving it.
Robert Browne, Partner at KPMG in the UK, says: “I frequently talk to executives who cannot articulate their pricing strategy clearly and most admit they don’t know who really has the final say on pricing.
“Almost all firms have a Chief Procurement Officer to optimise costs, yet they fail to give the same prominence to a pricing role that could do the same for revenues and margins.
“Traditionally, the responsibility for pricing has been shared by the Marketing, Finance and Sales functions. However, this ultimately means that no-one actually leads on pricing and the dialogue across a business is shaped by the various departments’ competing pressures, viewpoints and incentives. In my view, these established contenders to lead on pricing all struggle to do the job, so it’s time for a rethink.
“Pricing is at last starting to get the recognition it deserves, but greater debate in company boardrooms does not go far enough – the moment has arrived for a Chief Pricing Officer to join the board.”
However organisational ownership isn't the only issue leading to ineffective pricing; it can also be fear of unintended consequences or over-confidence or simply because the incentives are wrong.
The report also explores the feeling that at many companies don’t believe they are in charge of their pricing and in fact the market or customers set the price.
Other pieces in the collection explore how new pricing function might be set up, the role of the Chief Pricing Officer, and the sorts of investments a business might need to make in order to ensure a sustainable, positive pricing culture can be maintained.
In the final piece, Robert Browne explores if pricing has a limit and whether the use of pricing analytics, given companies’ access to consumer data and behavioural patterns, may lead to a break-down in trust.
To access a full online copy of the report, please click here.
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Jess Liebmann, KPMG Corporate Communications
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KPMG LLP, a UK limited liability partnership, operates from 22 offices across the UK with approximately 12,000 partners and staff. The UK firm recorded a turnover of £1.9 billion in the year ended September 2014. KPMG is a global network of professional firms providing Audit, Tax, and Advisory services. It operates in 155 countries and has 162,000 professionals working in member firms around the world. The independent member firms of the KPMG network are affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. Each KPMG firm is a legally distinct and separate entity and describes itself as such.
This article represents the views of the author only, and does not necessarily represent the views or professional advice of KPMG in the UK.
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