In the past decade, more than two-thirds of revenue growth amongst the top 50 global fast-moving consumer goods companies has come from pricing and mix.
Small changes in average price will translate into huge changes in operating profit. Most of our clients, in our experience, have plenty of room for improvement. We have helped our clients turn pricing into sustainable profits by exploring the tradeoff between price and performance and discovering the real value of each product or service for each customer segment. Pricing is often thought of as an afterthought with little emphasis nor time dedicated to pricing education. Yet a 1% decline in average price will translate to an 8% decline in operating profits.
Working with clients, SPMG has seen companies that have made the effort to build rigorous revenue management programs achieve improvements in EBIT ranging from 2-10% of top-line sales. For a 5 billion dollar company, that’s $100 million to $500 million a year in newly realized profits.