Time to let CEOs 'decide on pricing matters'
Dubai, April 9, 2014
The B2B companies in the Gulf region must let their CEOs take on the responsibility in pricing matters to help significantly improve their profitability, said experts at a recent sales conference in Dubai.
The conference was held under the theme "Pricing and sales excellence in B2B industries: Achieving profitable revenue growth" by the global strategy and marketing consultancy Simon-Kucher & Partners in Dubai last week.
C-level involvement combined with the right price implementation methods is the apt remedy for companies to tackle strong price pressure and the price wars, they stated while speaking at the conference.
A brief survey conducted at the event found that companies in the GCC face increasing price pressure, and price wars frequently break out in the region’s competitive B2B market.
The respondents agreed that the price pressure they face in the region is their most pressing pricing challenge – and that this strong pressure is even increasing.
No fewer than three-quarters of the conference attendees stated that they are currently involved in a price war. In light of this competitive market situation, only a tiny share of participating industry representatives are confident that their companies score high in terms of pricing power, i.e. the ability to get the price they deserve for the value they deliver.
To Dr Georg Tacke, CEO of Simon-Kucher, these findings do not come as a surprise. As he revealed in his presentation on pricing excellence, they are absolutely in line with Simon-Kucher’s Global Pricing Study*, which is conducted each two years.
Surveying decision-makers in all major sectors across the globe, the study shows that increasing price pressure, price wars and low pricing power are common issues for companies, resulting in 90 per cent of them being unable to achieve their initially intended price increases.
Considering the very strong pricing pressure in the GCC, it is crucial that pricing becomes a boardroom topic in the region, Tacke told the conference participants.
The C-level involvement in the pricing process can improve a company’s pricing power by 35 per cent. "C-level managers must communicate a clear strategy and create a profit-oriented company culture," noted Tacke.
"This means including pricing in an early phase of innovation, and setting meaningful pricing KPIs for associates. Given the challenging market conditions, achieving organizational pricing excellence is indispensable for the regional companies to prosper, he added.
At the conference, participants had the opportunity to learn first-hand from best and worst practices in pricing and sales of various B2B industries and countries during the presentations given by Simon-Kucher’s international team of experts.
Presentations clearly underlined that notwithstanding certain sector characteristics, the right implementation of prices through the sales force is the key to pricing power in the B2B sector. By applying the right methodologies, such as peer pricing or discount and rebate structures, companies can achieve higher returns and improve their profitability significantly.
As the conference’s highlight, Prof Hermann Simon, the founder and chairman of Simon-Kucher, reported on the success strategies of the "hidden champions", the mostly unknown medium-sized companies that are world leaders in their respective fields.
Simon showed that these companies, not the large multi-nationals, are the foundation and driving force behind economic growth and innovation in many economies.
"All businesspeople in the Gulf region must establish their own hidden champions to drive the local economy further," he added.-TradeArabia News Service