Advertise with fastmoving.co.za
 
 

Download the Global Pricing Study 2011 - Simon-Kucher & Partners
Download the Global Pricing Study 2011 - Simon-Kucher & Partners

Global Pricing Study 2011

Sep 5th 2011, 11:38

Sixty five percent of 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 of the companies 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 global 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 about their profit culture, pricing power, the profit outlook and how they protect themselves from inflation risk. Almost half of the respondents from Europe, the US and Asia are from companies with more than one billion euros in sales; C-level executives account for one-third of the respondents.

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 Dr. Georg Tacke, CEO of Simon-Kucher & Partners.

Pricing power untapped
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 remaining 65 percent of companies admit having only very little or no pricing power, which is why it’s clear from the beginning that the target price cannot be achieved. The weak performance is costly. It cuts profits by one-quarter.

Industries and countries differ considerably in this regard: chemicals (14
percent) and transport & logistics (19 percent) have the lowest pricing power. Battered markets like Spain and Italy are the weakest countries when it comes to pricing power. Companies in Poland, the US and France and industries such as pharmaceuticals and consumer goods are ranked best and achieve more often market prices that are in line with the value they offer. What differentiates the companies with strong pricing power from low performers? "The primary drivers for high pricing power are customer value and brand," explains pricing expert Tacke. "Every company has the ability to achieve high pricing power. If a company can offer its customers real value and communicates that through a top brand, this will translate into money." Companies that excuse weak performance by blaming competitors are deceiving themselves.

Price wars continue
46 percent of companies are still engaged in price wars. The vast majority of managers (83 percent) blame their competitor for triggering it ?
although statistically that’s not possible. Leading the country comparison with 84 percent, Japan is by far the most militant price war market, followed by Italy (69 percent) and Spain (65 percent). "Managers need to strive for profit, not for market share. Price is the strongest profit driver," says David Vidal, director at Simon-Kucher & Partners and co-author of the study.

Inflation threat underestimated
Pricing is a topic that has always been neglected by many companies. With inflation around the corner, they will pay the consequences: The survey findings reveal that the vast majority of companies are only able to get half of the target price increase. Only 36 percent of companies achieve at least three-quarters of their originally planned price increase. The telecommunications industry (25 percent) is clearly below average, but the US (31 percent) is also weak when it comes to price implementation.

Lacking experience, managers use the inflation rate as a benchmark for price increase targets. 68 percent of managers plan to increase prices below or in line with inflation rates. "It’s fatal to use the inflation rate as a benchmark when you take into account that the majority of companies are weak in price implementation. This won’t be enough. They’ll probably end up paying the difference," concludes Georg Tacke. Only the construction, industrial goods and transport & logistic industries plan to increase prices above the inflation rate.

To cope with the inflation risk, pricing know-how differentiates the smart companies from the low performers. The study results reveal the formula for success: The better the pricing know-how, the higher the pricing power, the higher the profits. At least 25 percent higher profits are proof enough.

*About the Global Pricing Study 2011
The Global Pricing Study 2011 from Simon-Kucher & Partners surveyed over 3,900 high-level decision makers from companies in all major service and manufacturing industries across Europe, the US and Asia. The research reveals profit orientation, pricing power, inflation and profit outlook.
Almost half of the respondents are from companies with more than one billion euros in sales; C-level executives account for one-third of the respondents. The study was conducted in collaboration with the Professional Pricing Society (USA) and the IE Business School (Spain).

The management summary of the Global Pricing Study 2011 is available on request. Please contact Claudia Schulz at Simon-Kucher & Partners:claudia.schulz@simon-kucher.com, tel: +49 228 98 43 372.
 

Related Activity

Rhodes Food Group adds new products to its Squish Baby Foods range 15
JAN
Rhodes Food Group adds new products to its Squish Baby Foods range
Rhodes Food Group, producer of popular convenient baby and toddler food brand Squish, has launched an extended range to its Squish portfolio of 100% fruit and veg purees, and 100% fruit and veg pressed infant juices.
Hansa Golden Crisp brings easy drinking beer to SA07
DEC
2018
Hansa Golden Crisp brings easy drinking beer to SA
Hansa Golden Crisp, a bespoke beer designed for unisex appeal, has been launched by The South African Breweries.
Red Velvet Trifle with Vanilla Cream Cheese Filling 03
DEC
2018
Red Velvet Trifle with Vanilla Cream Cheese Filling
Transform traditional trifle into a red velvet Christmas confection by adding vanilla cream cheese filling and seasonal berries.
Fitch & Leedes spices up the art of mixology with new Ginger Beer27
NOV
2018
Fitch & Leedes spices up the art of mixology with new Ginger Beer
New Fitch & Leedes Spicy Ginger Beer, the intrepid mixer with a sense of adventure from Chill Beverages International (Pty) Ltd, is taking the enjoyment of fine spirits to the next level.

Try these recipes

Cheesecake with Green Kiwi Fruit10
JAN
Cheesecake with Green Kiwi Fruit
A delicious favourite gets a nutritious twist that’s guaranteed to keep your loved ones both happy and healthy. Serves 10.
Mango and Passion Fruit Relish Skewers09
JAN
Mango and Passion Fruit Relish Skewers
This relish tastes good with chicken or beef.
Creamy, Crispy Christmas Potatoes19
DEC
2018
Creamy, Crispy Christmas Potatoes
These potato skins are stuffed with a whole lot of creaminess.
Peach and Basil Sangria18
DEC
2018
Peach and Basil Sangria
Bursting with flavour and colour.

Related News

What FMCG companies can learn from the online trading industry
18/12/2018 - 08:09
Fast-Moving Consumer Goods (FMCG) are, by their very nature, products that are designed to be sold quickly at a relatively low cost. Unlike luxury items that often need to sit on the shelf for an extended period of time in order to build up some exclusivity, FMCG products need to be sold as quickly as they’re advertised. With speed being the key ingredient in the FMCG industry, any weak links in the chain can harm a manufacturer's bottom-line.

Listeriosis outbreak haunts Tiger Brands
23/11/2018 - 10:06
The Listeriosis outbreak in South Africa came back to haunt Tiger Brands, with the group reporting a 26 percent decline in headline earnings per share (Heps) to 1 587 cents a share during the year to end September, while revenue fell 9 percent to R15.87.

Black Friday spikes turnover for SMEs
22/11/2018 - 10:50
Even though it is tempting to relegate Black Friday as just another marketing gimmick, the reality is that it signifies the start of a month-long consumer spending frenzy that significantly boosts retail revenues.

#WomensMonth: How do women fare in the South African retail market?
15/08/2018 - 09:06
While we focus on women in South Africa during the month of August and honour our constitution for declaring the 9th of August a public holiday; retailers continue to look closely at the overall economic status of women. How liquid is the average women consumer? What does she buy? Does she have the buying power in a household and what does that household look like?

Supply chain risk management for resilience in grocery manufacturing
25/07/2018 - 16:11
Competitive. That is the one word that certainly describes the modern business environment best and a factor that drives many firms to expand their operations globally for cost-effectiveness.