Survey says CEOs are critical to pricing power

More than 65 per cent of companies in the Asia-Pacific region face intense pricing pressure from competitors and customers, according to the online survey of more than 2700 executives across companies in the US, Europe and Asia. Nearly 38 per cent of the respondents were C-level executives.

In 39 per cent of companies in APAC, C-level executives have increased their involvement in pricing and thereby enjoy stronger pricing power, the study said. At companies where management involvement is limited, this number is less than half.

The survey found that 53 per cent of the companies where top managers play an active role in pricing report higher EBITDA growth expectations for the next three years. Just 31 per cent of the remaining companies expect a strong increase in EBITDA.

Moreover, companies where chief executives determine pricing are 49 per cent more likely to have a dedicated pricing function than others. Companies with a dedicated pricing organization in turn are 17 per cent more likely to increase prices successfully than those that lack one. What’s more, 20 per cent of these companies are likely to get higher margins from price increases. That is important because, globally, a third of the companies that did go for price hikes did not manage to increase profit margins.

"Every point of margin you can get from a price increase is precious in today’s economic climate in APAC," said Jochen Krauss, managing director of Simon-Kucher’s Singapore office. "No matter if it’s in Singapore, Malaysia or any other Asian market. That’s why the executives not only need to put more of their own time and energy into pricing, but they should also equip their companies to do the same."

Creating and exercising pricing power used to be a luxury, Krauss added. "Now it has become an essential survival skill," she said. "Companies need end-to-end coordination: from strategy to analytics to interpretation and implementation."