Vendavo Identifies Significant Regression in Enterprise Price Maturity
The 4th Global Pricing Maturity Survey from Vendavo & EPP Finds More Organizations Today Are Trying to Sell Any Product to Anyone, At Any Price
Vendavo, the global market leader in B2B price management and commercial excellence solutions, revealed organizations have regressed in their pricing maturity over the last four years. The 4th Global Pricing Maturity Study, conducted by EPP, found 41 percent of organizations price their products and services in a basic, level one pricing structure – 25 percent more than companies that did so in 2019.
Level one pricing describes organizations that attempt to sell any product to anyone at any price and their primary pricing action is to maintain a price list. To capture full value for products and services, level three pricing is an important threshold for maximizing an organization’s profitability. It includes value-based pricing which relies on segmented customer groups’ willingness to pay before deciding price.
Implementing pricing improvement delivers greater organizational profitability according to McKinsey & Company – a 1% price improvement results in an 8.7% increase in operating profit. “In our changing economic landscape initiated by a global health pandemic and exacerbated by massive supply chain breakdowns, persistent inflation, and war, manufacturers and distributors face serious challenges to their bottom lines,” says Mitch Lee, Profit Evangelist, Vendavo. “Strategic pricing improves profitability despite these troubling macroeconomic events, yet they failed to put the power of price to work for them.”
Read More: SalesTechStar Interview with Jeannine Shao Collins, Chief Client Officer at Kargo
Other findings from the study include:
- Cost-plus pricing, or the addition of a single percentage mark-up, is the basis for price setting for most (68%). Implementing value-based pricing is the goal for 90%.
- Understanding customer willingness to pay is based only on internal judgment for over half (57%).
- Nearly one-third do not have a professional pricing team. Instead, they rely on sales, marketing, or finance to set prices. Nearly all respondents (90%) know they need one.
- Most organizations today continue to rely on Excel spreadsheets rather than professional pricing software (87%). Most have the goal to implement it however (85%).
“We view the average decline in pricing maturity as good news because more organizations have stepped in – conscious of the importance of investing in pricing capabilities and all ambitious for change,” says Pol Vanaerde, President, EPP.
Read More: Carving is for Turkeys, Not Territories