The benefits of an effective pricing practice are significant. A McKinsey report on pricing estimates that an average 5% improvement in return on sales from improved pricing creates $1.5 billion in additional value over 5 years for the average S&P 500 company. In today's tough economic climate companies cannot afford to leave any potential revenue on the table.
An effective pricing practice consists of two main processes: price setting and price execution. In each process, it is critical that a company incorporate insight into the net profitability of their customers and products. It is the only way to be sure that the prices being set are effective. However, few companies do this today.