CEOs key to pricing strategy in Asia

4 December 2012

SINGAPORE: Brand owners in Asia Pacific tend to enjoy higher pricing power when senior executives actively help set strategies in this area, a report has revealed.

Simon-Kucher & Partners, the consultancy, polled 2,700 senior decision-makers from corporations around the world, and broke out the results for Asia Pacific, including China, Singapore and Japan.

In all, some 65% of companies in the region agreed they faced intense pricing pressure, be it from rival firms or customers, a trend effectively "aggravated" by inflation and volatile commodity costs.

"Staying in a pricing 'comfort zone' is no longer an option for C-level executives in the current economic climate," Georg Tacke, CEO of Simon-Kucher & Partners, said.

More specifically, the study found that 39% of companies had both seen C-suite executives increase their role in setting how much to charge for products and now boasted "high pricing power".

When discussing enterprises where senior managers had not heightened their involvement in the same way, the percentage of firms with similar resilience in the pricing arena was less than half this amount.

The businesses with leaders that played an enhanced part in deciding these matters were also 49% more likely to have a dedicated pricing unit than operators where this was not the case.

Further, companies with a standalone pricing team had a 17% greater likelihood of successfully implementing price increases measured against competitors that did not possess such a function.

Moreover, the leaders in this field were 20% more likely to yield better margins having raised their prices than their rivals, the analysis added.

A 53% majority of senior managers who were particularly active with regard to pricing also expected to enjoy strong growth in earnings before interest, taxes, depreciation and amortization in the next three years, falling to 31% elsewhere.

"Pricing power begins at the top of the organization,” Tacke said. "When C-level executives turn their attention to pricing, their companies are more likely to have a stronger profit outlook ...  It's a leadership obligation for the executives, not a day-to-day operational one."

Data sourced from Simon-Kucher & Partners; additional content by Warc staff