Finance and Accountancy Briefing
Global study reveals weak pricing cuts profit by 25%
Almost half of the respondents from Europe, the US and Asia are from companies with more than 1bn euros in sales; c- level executives account for one-third of the respondents.
The study results show that companies underestimate the inflation threat and are badly prepared when they need to increase prices. But inflation is inevitable.
"To secure profits, managers need to make their company inflation safe. Using the inflation rate as a benchmark for the price increase target is, in most cases, the wrong strategy," says Dr George Tacke, CEO of Simon Kucher & Partners.
Pricing power is the ability of companies to get the market prices they deserve for the value they deliver customers. Only one-third have sufficient pricing power and know how to turn value into money. The remaining 65 percent of companies admit having only very little or no pricing power, which is why it’s clear from the beginning that the target price cannot be achieved. The weak performance is costly. It cuts profits by another quarter.
To read more of Simon Kucher & Partners' findings, please download a copy of the full paper now.