Pricing – Your company's untapped source of profit potential?
Did you know that pricing is the profit lever that both generate the largest and quickest bottom-line impact?
Despite its large potential, most companies are not actively working with pricing. Instead, many companies focus on cost reductions and sales volume increase initiatives, where the financial benefits are significantly lower.
Axholmen helps its clients identify and unlock the pricing potential. The projects are often self-financing due to the significant financial upside potential. Read more below on key topics per industry, the typical financial potential we see, and our typical collaboration approaches.
Pricing is a key topic for SaaS and Tech companies. Reviewing packaging and pricing typically bring 10-20% in increased ARR, while also positively impacting other factors such as NRR and the enterprise valuations.
Having a structured pricing could bring significant potential to service companies. Working with offering design, price setting and value-based selling could result in a 2-5 p.p. increase in return on sales.
Working systematically with e.g. value-based pricing, discount steering, trade terms, and sales excellence could bring 2-5 p.p. increase in return on sales for industrials and chemical companies.
Working systematically with e.g. value-based pricing, trade terms, and promotion efficiency could bring 2-5 p.p. increase in return on sales for consumer goods companies.
Pricing has a significant potential for retailers. Working systematically with e.g. customer segmentation, the assortment, range pricing, and promotion efficiency could bring 2-5 p.p. increase in return on sales.
Rightly used, Pricing is a key lever that can help companies drive top-line growth, bottom-line profitability, and enterprise / shareholder value:
Immediate effect on bottom-line: A price increase will directly increase the bottom-line (assuming all other things being equal)
Substantial profitability uplift: A study of the OMXS30 companies found that if companies increased prices by just 1 percent, their average operating profit would increase by 9 percent (assuming all other things being equal)
Driver of enterprise / shareholder value: The increase of profitability from a price increase typically affects the enterprise / shareholder value, given the fact that an increased profitability is multiplied by an earnings ratio to derive the enterprise value
Relatively easy to implement: Price changes do not require much investment and can in many cases be implemented overnight
SaaS and Tech
Pricing is a key topic for SaaS and Tech companies. Reviewing packaging and pricing typically brings 10-20% in increased ARR, while also positively impacting other factors such as NRR and the enterprise valuations.
Typical challenges we resolve for software companies are:
Segmenting customers based on needs and usage
Developingpackages based on the perceived value of functionalities
Selecting a price model that benefits both your customers and your company
Setting price and discount levels aligned with willingness-to-pay
Enabling the sales team to argue based on value instead of price
Migrating customers to a new price / offering model
Professional services
Having structured pricing could bring significant potential to service companies. Based on our experience, working with offering design, price setting and value-based selling could result in a 2-5 p.p. increase in return on sales.
Typical challenges we resolve for professional service companies are:
Segmenting customers based on needs to focus resources and steer prices
Formulating service packages/bundles to facilitate the sales process
Creating subscription offerings to increase recurring revenue
Selecting a price model that is based on outcome instead of costs
Setting price and discount levels aligned with willingness-to-pay
Enabling the sales team to argue based on value instead of price
Industrials and Chemicals
Working systematically with e.g. value-based pricing, discount steering, trade terms, and sales excellence could bring 2-5 p.p. increase in return on sales for industrials and chemical companies.
Typical challenges we resolve for industrials and chemicals companies are:
Developing avalue-based price logic based on customer value drivers
Designing a model for steering discounts based on customer-specific drivers
Monetizing the aftermarket by adjusting prices on spare parts and service contracts
Formulating and negotiating trade terms that drives desired behavior among trade partner
Enabling the sales team to argue based on value instead of price
Setting up a systematic process for tenders, including preparation, execution, and follow-up
Consumer goods
Working systematically with e.g. value-based pricing, trade terms, and promotion efficiency could bring 2-5 p.p. increase in return on sales for consumer goods companies.
Typical challenges we resolve for consumer goods companies are:
Segmenting customers based on needs
Developing a value-based price logic based on customer value drivers
Designing promotionsthat drives sales without compromising unnecessarily on margins
Formulating and negotiating trade terms that drives desired behavior among trade partners
Introducing functions and processes for price setting, steering, and reporting
Retail
Pricing has a significant potential for retailers. Working systematically with e.g. customer segmentation, the assortment, range pricing, and promotion efficiency could bring 2-5 p.p. increase in return on sales.
Typical challenges we resolve for retailers are:
Segmenting customers based on needs and buying occasions
Determining item roles (image/variety/longtail) and assign assortment and pricing rules to them
Designing promotions that drives sales without compromising unnecessarily on margins
Creating attractive loyalty programs to retain customers
Introducing functions and processes for price setting, steering, and reporting
Engagement options
For over 15 years, we have been helping businesses improve conversion, update their offering structure, and maximize the effect of price revisions with a proven ROI on 100% of projects during this time.
By customizing project scope and duration in collaboration with our customers, we ensure effort is placed where we can make the greatest impact.
Focused pricing review
I want a second opinion on the company’s offering and/or price model(s)
Pricing roadmap
I want an overview of the company’s pricing potential and a concrete plan to capture it
Most popularPricing (re-)design
I want a new offering, price, and/or discount model to the company
Pricing transformation
I want a full upgrade of the pricing performance within the company
Duration (typical)
1-10 days
2-6 weeks
6-12 weeks
Based on scope
Longlist of pricing opportunities
Pot. and feasibility est. of pricing opportunities
Roadmap to realize pricing opportunities
Preparation of new pricing design
Testing of new pricing design
Implementation plan for new pricing design
Support in implementation and/or customer migration
Sales enablement development
Included
Included on a high level
Not included
Want to learn more?
Milosz Tersmeden, Partner and CEO
15 years experience from B2B and B2C Commercial Excellence projects within Manufacturing, Logistics, Transport, Enterprise and Consumer SW/HW, Professional Services, Managed Services, Financial Services and Consumer Goods.
Felix is specialized in commercial strategy, where he advises on e.g. marketing, pricing, and sales. He has published four books on commercial excellence and figures regularly in media. He has previous experience in consulting from Simon-Kucher and EY, and a double degree in Engineering Physics and Economics from Lund University.
Our project delivered a new commercial offering design and recommendation of growth levers to increase ARPU, conversion and improve net retention, providing a potential revenue uplift of 10%.
