How’s your pricing budget coming along? Are you committing enough human resource to the effort? Are you investing enough in pricing technologies? How do you know if your investments are really keeping pace with your competitors?
And how do you know you aren’t just being lulled into a false sense of security because you’re doing “something”…even though that “something” may not be enough?
When it comes time to plan for next year’s budget, these are the types of questions that plague many of our subscribers. And at the encouragement of one of those subscribers (thanks Paul!), we decided to poll the PricingBrew community about their pricing budgets and headcount levels.
We’ve compiled and published the results in a PricingBrew Journal research brief entitled, Comparing Pricing Budgets and Resources. Showing the results in relation to revenue and breaking them down by business type, the brief allows you to see how your human resource plans, spending levels, and allocations stack-up.
Can you guess which types of companies invest the most in pricing?
Somewhat predictably, investment in pricing resources increases as inherent margin levels decrease. Having the fattest margins, software and business services companies invest the least in the pricing. With fairly “plump” margins, manufacturers fall in the middle of the range. And with razor thin margins, distributors and retailers invest the most in pricing across the board—bigger pricing teams, more pricing technology, etc.
For example, distributors and retailers have at least twice as many pricing people as similarly-sized manufacturers and invest over three times as much in pricing technology.
Does that mean active pricing management is more important and beneficial to a distributor than to a manufacturer? I don’t believe so. After all, while dropping another $20M to the bottom line through more effective pricing won’t represent as large a percentage bump for a business with fat margins, it’s still another $20M, right?
To my mind, the relative spending levels are simply indications of priority rather than importance and efficacy. And certain types of businesses have simply recognized, acknowledged, and funded the pricing priority much sooner than others.
So take a look at the averages and ratios in Comparing Pricing Budgets and Resources and see if you’re really making pricing a priority in your business.