“Pricing and the CEO” – Hermann Simon, Chairman, Simon-Kucher & Partners | The Marketing Journal

We are observing an increasing involvement of CEOs in pricing, which has a significant impact on profit performance. The CEO’s role is threefold: strategic, cultural, and custodial. If a company chooses a premium price positioning, all aspects of strategy, culture and implementation have to be different from those of a company that aims for a low price position. While the CEO should not get involved in the details of pricing or price negotiations, he or she must make sure that all efforts are aligned according to the necessities of the selected position.

In the global pricing studies which Simon-Kucher & Partners con­ducts every two years, we have observed an increasing involve­ment of CEOs in pricing. We found that companies whose top managers took a strong, personal interest in pricing stood out compared to companies whose senior executives did not take on such an active role, as the following results show.

For companies with strong CEO involvement:

  • the pricing power was 35% higher.
  • the success rate for implementing price increases was 18% higher.
  • Twenty-six percent more achieved higher margins after the price increases, which means they were not just passing on higher costs to their customers.
  • Thirty percent had a special pricing department, which in turn had an additional positive effect on profits.

CEOs often ask me point-blank for my silver bullet in pricing. Is there one thing in pricing they can do to make their companies better off?

Knowing that my background goes back decades in both academia and consulting, they probably expect the classic consultant’s evasive “It depends.-. or some scholarly rhetoric which is long on syllables and short on relevance. They get neither. Instead, the answer starts with one word: profit. “You need to cement the link between price and profit in the minds of your managers,” I tell them. “Price is a company’s most effective way to drive enterprise value, but it is an extremely sensitive lever’.

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“Pricing and the CEO” – Hermann Simon, Chairman, Simon-Kucher & Partners.