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August 2011 | Adam Leach
between suppliers means almost half fail to increase prices by as much as they
to TheGlobal Pricing Study 2011,
published today by consultancy Simon-Kucher& Partners, 47 per cent of companies fail to
achieve their intended price increase. Some 36 per cent of businesses were able
to raise prices to 75 per cent of their original target.
a result vendors were warned that raising prices in line with inflation – the
strategy of 68 per cent – could be “fatal”, as they are unlikely to
be able to negotiate those increases and risk losing profit.
Tack, CEO at Simon-Kucher & Partners, said: “It’s fatal to use the
inflation rate as a benchmark when you take into account that the majority of
companies are weak in price implementation. This won’t be enough. They’ll
probably end up paying the difference.”
study also found that as a result of not being able to charge desired prices, company
profits are being cut by 25 per cent. The report called on companies to set
prices to boost profit, rather than to increase sales volumes of market share.
It also stressed the need to price new products or services accurately in the
marketplace, and to make staff better informed about how pricing is calculated.
this month, a report by the Hackett Group found that procurement departments were not prepared to deal with the current
volatile inflation rates. More proactive companies are forecasting prices and
hedging risk by adapting contract length, purchasing volumes or inventory
levels. But few companies surveyed reported having a clear direction or policy
on how to deal with volatile prices.