A tremendous profit lever…
For a company achieving a 5% Net Margin with 2/3 fixed and 1/3 variable costs: a 1 % improvement in price translates into a 20 % increase in profit.
1% price ⇒ 20% profit
This effect is 50% higher than the effect of a 1 % increase in sales volume or a 1 % reduction in fixed costs and more than 3 times higher than the effect of a 1% reduction in variable costs.
Profit increase resulting from a 1% improvement in…
Operator with 5% Net Margin, 2/3 fixed and 1/3 variable costs
…triggered by multiple benefits…
Pricing brings organizations an additional 2.4% Net Margin on average. This represents a 2.4 million euro additional profit every year for a 100 million euro turnover company!
Key benefits brought by Pricing
- x 2 Faster Quotes (e.g. from 3 weeks to less than 1 week in case of complex deals)
- +20% Sales Efficiency (more time for your sales team to develop new business)
- +16% Win Rate (in acquisition and business development)
- +24% Margin by Deal (in acquisition and rerating)
- +12% Customer Retention
- 100% Forecast Accuracy
- Eradication of Billing Errors
…but Pricing is challenging!
Despite its power, the pricing lever still remains untapped by many companies because it has not yet been identified as a key area of performance improvement or because a consistent plan to improve pricing capabilities has not yet been defined.
Open Pricer can help you improve your pricing capabilities through a Pricing Power Assessment.