Elsevier

Business Horizons

Volume 65, Issue 4, July–August 2022, Pages 457-467
Business Horizons

Pricing as a driver of profitable growth: An agenda for CEOs and senior executives

https://doi.org/10.1016/j.bushor.2021.06.002Get rights and content

Abstract

Most CEOs take a narrow, tactical view of pricing and delegate pricing to lower levels of the organization. This myopic approach is costly, as it prevents companies from realizing their potential. In the hands of the best-run companies, pricing is not a battlefield tactic to win a particular competitive skirmish but a transformative long-term strategy for sustained competitive advantage. We present an agenda of six specific action items that defines how to unlock the power of pricing. CEOs and senior executives, our research suggests, should not set prices, but instead, they should create the context, the capabilities, the behaviors, the infrastructure, and the aspirations that enable their organization to excel in pricing.

Section snippets

Pricing: Important, but not on the agenda of senior executives

Many companies are significantly less profitable than they could be. The obstacle is what we call pricing myopia. How big is the obstacle? A growing body of academic and practitioner research shows that pricing has greater power to drive profitability than any other managerial instrument, including revenue growth or cost reductions (Kohli & Suri, 2011). Numerous studies also show that small changes in selling prices—too small to matter to most customers—can nevertheless have a huge influence on

Pricing: The hidden treasure

Our research (see Appendix) over the last 10 years—consisting of a survey of 557 CEOs followed up by 49 interviews with CXOs, VPs of pricing, and pricing software vendors, plus a separate survey of 443 pricing professionals—reveals that CEOs and senior executives regard pricing mainly as a tactical activity. Therefore, it is delegated to lower-level functions (e.g., customer service representatives, controllers, key account managers, sales managers, marketing managers) as one might delegate the

An agenda for CEOs and C-suite executives: Six key action items to drive profits via pricing

Just as coaches do not shoot the baskets, pricing champion CEOs should not and do not set prices. What they do—not unlike what a good coach does—is create an aspiration that pricing will support their organization’s transformation and drive greater and more sustainable profits. They lead the creation of the necessary mindset, infrastructure, capabilities, and tools. At the same time, they provide direction and create the context for pricing as a transformative long-term strategy. That sounds

Conclusion

Larry Bossidy, CEO of AlliedSignal, described the job of a CEO as follows (Tichy & Charan, 1995, p. 70):

The leader's job is to help everyone see that the platform is burning, whether the flames are apparent or not. The process of change begins when people decide to take the flames seriously and manage by fact, and that means a brutal understanding of reality. You need to find out what the reality is so that you know what needs changing.

A CEO identifies a key issue that the organization does not

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