Benchmark Pricing Practices to Improve Profits

 Email Article  

Tweet  

  

  

  

 delicious  

  

In a recent Industry Week article How Good is Your Benchmarking?, Steve Minter discusses benchmarking best practices, drivers and implications.   The article highlights benchmarking projects that address different process areas such as supply chain performance, manufacturing performance and operations performance. 

While these types of benchmarking initiatives are important, I think it's also important to expand the list to include one of the most under-leveraged areas within a company: pricing performance. It's surprising that so few companies have really invested in benchmarking their pricing performance considering the fact that a focused pricing practices benchmarking effort can reveal valuable insights and open door to improving profits.  If you're considering a benchmarking study, include pricing as part of it. 

The most important first step for pricing benchmarking is to articulate the objectives of the effort and its scope.  For example, you can consider the entire pricing process - right from identifying pricing opportunities through analytics to setting prices and deal negotiation.  Alternately, you can consider a narrower pricing process area.  As part of setting objectives, it is critical to define the metrics that you are most interested in understanding or improving.  For the price administration processes, a metric you could consider is invoice accuracy and the goal is to measure your organization's invoice accuracy relative to others that your customers may be working with.

Depending on your objectives and scope, the study should collect data through customer meetings or surveys, internal interviews, and external research (web, analysts, and pricing experts).  By collecting information from diverse sources, you can form an accurate picture of how your organization is performing relative to others and the improvement that you need to make.

One of the biggest failings of any benchmarking exercise is lack of follow-up.  If you are investing in a pricing benchmarking initiative, it is critical to take the next steps to act on the recommendations and become a best-in-class pricing organization.  In addition, benchmarking is not a one-time exercise.  Considering the dynamic nature of pricing, you need to continuously refine your pricing processes and practices to maintain your leadership position. 

The Business Performance Improvement Resource has good reference material to understand benchmarking, its value and how you can get started.