Consider this: a 1% price increase generates 40% more profit than a 1% cost reduction.
Yet executives obsess over shaving costs and often ignore strategic pricing.
This oversight is understandable but solvable. Pricing is complex with no quick fixes. However, the payoff for getting it right is huge.
Ask yourself:
- When did you last review your pricing model?
- Is it truly aligned with the value customers receive?
- As that value grows, does your revenue grow accordingly?
- If you charge per seat or unit, do you regularly audit usage?
- For custom work, do you charge incremental fees?
- Do your prices include escalators to offset inflation?
Escalators magnify revenues over time. Hike prices 5% annually and revenue jumps 10% in 3 years, 22% in 5 years.
The work required to optimize pricing is daunting but worthwhile. The most profitable lever is right before you. Are you pulling it to its full potential?
A 1% price increase generates 40% more profit than a 1% cost cut, so smart pricing deserves far more attention.
