3 Reasons to Make Pricing Research Part of Your Post-Pandemic Growth Strategy

  1. Price points often fluctuate during a pandemic as consumer behaviours change (i.e. remote work) and macro issues such as inflation and supply, impact the decision matrix. Nothing impacts the bottom line more than a price increase…not higher sales, not cutting unit costs. According to a survey by McKinsey Consulting just a 3% price increase will on average boost the bottom line of a business by 24%. Think about that for a minute. Let’s say you sell a product for $45 and pricing research suggests unit volume will hold just as well at $49 (i.e. we call this a “price plateau”; that span on the X/Y unit volume, price axis, when unit volume holds steady in the face of higher unit prices ). That 9% price increase will grow net operating profit before tax by over 70%. Here is an example; your net operating margin (gross revenue minus cost of goods plus operating expenses) for your $45 product is 10%. By raising the price to $49 you have now increased your new operating margin (i.e. also known as Earnings Before Interest and Tax or EBIT) to over 17% due to the fact that virtually all of the new revenue generated by a price increase falls directly to the bottom line.

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Robert Tinterov

Robert Tinterov

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Robert Tinterov is the CEO of one of the leading global pricing companies, Atenga Insights, which is headquartered in Sweden with a US office in California.