Study reveals weak pricing power cuts profits

According to study, “logistics organizations are often the wellspring of their own hopelessness.”


As indicated by another study directed by the global strategy and marketing consultancy Simon-Kucher and Partners, price pressure is higher in the logistics business than in different industries – regardless of the nation.


Simon-Kucher’s Global Pricing Study expressed that only “solid positioning and committed leadership” can help organizations in Europe, Asia, America and rest of the world to counter the pressure.


The Global Pricing Study 2012 depended on inquiries postured to 151 respondents from the transportation and logistics parts all through Europe, Asia, Northern and Southern America. The consultancy is situated in Bonn, Germany.


Dr. Philipp Biermann, a partner with the consultancy, said that the review uncovers that “logistics organizations are often the source of their own misery.”


“Three-fourths of logistics companies can’t get the costs they deserve for their services,” he added. “The causes are the price-aggressive competition and the pervasiveness of standardized items.”


Biermann noticed that successful organizations, regardless of industry, have “pricing power” – the capacity to charge costs that mirror the value of their products and services.


“Still, its significance in the logistics part, where margins are considerably lower compared with other sectors, ought not to be underestimated,” he said.


Logistics organizations with strong pricing power accomplish 17 percent higher margins than their rivals, said Biermann. “A solid market positioning and offering premium products extraordinarily enhance an organization’s pricing power – which likewise ensures worldwide business success,” he included.


Report Highlights: Weak Pricing Cuts Profit 25%

  1. 65% of the companies are not able to charge the prices they deserve
    1. Only 35% of the companies have sufficient pricing power to achieve the right price for their products/services.
    2. Low pricing power is costly. It cuts profit by 25%
    3. Chemicals (14%) and transport & logistics (19%) have the lowest pricing power


  1. 46% of companies still think they are in a price war (they didn’t start)
    1. The extent of price wars differs greatly by country and industry, the Japanese market has by far the highest level (84%).
    2. High level of misperception: 83% of companies in a price war blame competitors for starting it.


  1. Companies only get half of what they expect when they try to raise prices
    1. Only about one third of the companies is able to achieve at least 75% of the originally price increase.
    2. Telecommunications (25%) and life sciences (29%) have all the lowest price implementation performance.


With more grounded management involvement and a specific pricing system, an organization has the higher chance of higher pricing power, thus resulting in higher profits.


Full Global Pricing Study – Simon Kucher & Partners


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