How can pricing help companies get through times of crisis?

Price increases are the lever that most affects a company’s profitability. This is due to the fact that the price effect has a direct impact on net profit, since most of the time it is only reduced by taxes. When we studied the firms listed on the Bovespa, we were able to calculate the average size of this impact: 1% price impacts 12% on net profit. That’s right, a multiple of 12 times. This reality doesn’t just exist in Brazil; a study in the USA, for example, showed a multiple of 10 times.

In a scenario of uncertainty, with different crises occurring simultaneously, companies must always seek to protect their profitability. This significantly increases the firm’s chances of survival in the midst of so much turbulence.

But is there any way to increase profitability without hurting sales volume? The answer is yes. The evolution of the pricing strategy allied to the introduction of RM (Revenue Management) techniques increases assertiveness, guaranteeing improvements in promotional policies and improving the precision of the price product by product, region by region. By directing the discount towards the most elastic products and strengthening the price of inelastic products, profitability is increased while protecting sales volume.

Each company is at a certain level of pricing maturity, and the solutions for development are varied. And even those companies that are already at advanced stages of evolution can increase revenue and profitability through artificial intelligence.

Moments of uncertainty reinforce the need for evolution in pricing. There is no lever with more impact on profitability.