A pricing audit is often a good first step towards unlocking the value of your pricing opportunity.
There is often significant value in asking an experienced pricing leader to review a company’s current pricing processes and policies to understand where margin is being retained and lost. As a general rule, we have found the best advice comes from executives who have managed the pricing organization at businesses which are similar to but not part of your industry. This ensures the auditor is familiar with the basic business but can sidestep industry blind-spots.
Key Components of A Full Pricing Audit
A good pricing audit blends process assessment, organizational psychology, financial analysis, customer value, and competitive strategy. The final product should be a comprehensive view of how value is created by your organization and claimed in the market place.
- Transaction Administration
- Pricing Systems
- Price Lists / Maintenance
- Bid Pricing / Deal Desks
- Price Increase Process
- Price Overrides
- Billing / Collections
- Organizational Roles / Responsibilities / Incentives
- Sales Leadership
- Customer Service
- Pricing Team (if any)
- Product Management
- Other Strategy Teams
- Cost / Item File Team
- Credit / AR
- Current Selling Process
- Typical Selling Cycle
- Sales Pitch / Key Features
- Preferred Segments
- Order Taking Process
- Service Management
- Sales Oversight
- Current Pricing Strategy & Policies
- Financial Assessment
- Typical Customer Market Basket
- Account Acquisition / Attrition
- Customer Profitability Analysis
- Price Elasticity (if data available)
- Known Economies of Scale
- Voice of The Customer
- Buying Process
- Why They Buy
- Competitive Perspective
- Existence of Competitive Intelligence Process
- Current Market Leader
- Capability Gaps
- Board View
If a medium sized business already has some basic analytics in place, a good pricing audit can be completed within 30 – 60 days. This can be prolonged (at management’s discretion) if there is a need to build out analytics capabilities to support the decision making process.
For some organizations, this is an unparalleled opportunity to leap forward in terms of customer analytics, dashboard reporting, and product strategy. A good pricing audit should provide at least a cursory view of these areas to understand the value created by the team.
Most good pricing auditors can give you at least a high level road-map to facilitate board discussion on pricing and commercial transformation. Since the success of strategic pricing is often dependent on other functional teams (IT, marketing, sales), assembling this road-map may require a broad perspective and some political air-cover from the sponsor.
These road-maps can provide a powerful route to growth, however, often accomplished with minimal incremental investment in the business. Pricing Excellence improvement programs are unique in that the benefit often drops straight to the bottom line, frequently while freeing up capacity that used to serve marginally profitable accounts. This gives the business room to pivot their capabilities to support a more profitable customer or market segment.
Still have questions on how a pricing audit might apply to your business? Drop us a line at the contact information on this page and we will attempt to answer your questions.