European Pricing Maturity Study

European Pricing Maturity Study
2013 - Reflect, Reframe and Refocus

EPP European Pricing Maturity Study – 2013 Results

Content
Authors

4

3. European Pricing Maturity: perception versus reality

5

4. European Pricing Maturity: reality versus ambitions

Project Manager

3

2. Methodology

Nicolene Barnard

1. Introduction and key findings

7

5. European Pricing Maturity: industry benchmark

9

6. Industry Benchmark: Ranking Pricing Maturity Q2 2013

10

7. Conclusion

European Pricing Platform

12

Addendum: Industry benchmark

Pol Vanaerde
President EPP
European Pricing Platform
www.pricingplatform.eu

Page 2 of 13


Introduction and Key Findings
Pricing power is one of the key ways that businesses can create value
for themselves. Improving a company’s approach to pricing leads to
more opportunities to create and capture value for customers, which
results in increased sales and healthier margins. Developing pricing
maturity takes time and effort, but understanding how to capture
what customers perceive as valuable provides greater opportunities
for companies to perform better in their chosen markets.

“This unique
benchmarking study
shows that most
European companies
have still a lot of work
to do when it comes
to pricing maturity”

respondents found it difficult to convince management to invest in the
powerful pricing systems and tools which they deem necessary for
successfully executing their pricing strategy. This echoes the challenge
described in our whitepaper, Crossing the Pricing Chasm1, which
entails moving from seeing pricing as a project towards a situation
where pricing becomes a structured process, firmly embedded in the
commercial organisation.

4.

The European Pricing Platform (EPP), recently conducted the
first, cross-industrial European Pricing Maturity Study of its kind.
It investigates the perceived, actual and desired state of pricing
maturity in 121 companies across Europe.

In total, 88% of the respondents indicated that they intend
to invest in pricing software solutions over the next twelve
months. Reasons given for this investment include improvements to
price monitoring, reporting, price guidance and deal making.

In this ground-breaking new benchmarking study we find that:

The EPP developed the European Pricing Maturity Study, based on
the Pricing Maturity Indicator (PMI) survey, to offer European pricing
and profit optimisation management professionals a framework
against which they can determine the capability gaps in their company
and set the right priorities in their pricing journey.

1.

The majority of European organisations (56%) overestimate
their current overall pricing maturity level. This is especially
the case for organisations with pricing managers who are relatively
new in their jobs or where pricing is a new function in the company.

2.

A significant portion, 42%, of respondents still operate at the
most elementary level of pricing maturity, while 48% operate
on level 2, which means that they are selling the right products to the
right customers at the right prices, but that they lack full integration in
the commercial processes and alignment with marketing, sales and
finance. A serious challenge to tackle.

In doing so, we want to provide these pricing practitioners with a tool
to start the much-needed discussion around pricing maturity in their
organisations. It allows pricing leaders to reflect, reframe and refocus
on what is most important and relevant for them in getting from their
current level of pricing maturity to the next.

3.

While European pricing practitioners have a solid view of
where they should be heading in terms of their pricing strategy,
this study shows that the biggest challenge lies in the implementation
and execution of this strategy. Given the current economic conditions,

For a detailed description of the ‘crossing the pricing chasm’ challenge, read our recent whitepaper: ‘Crossing the pricing chasm –
a guide to Pricing Maturity Development’.

1

Page 3 of 13


Methodology
120+ European
participants

The 2013 European Pricing Maturity Study represents the opinions
of 121 pricing executives from different companies and industries
across Europe who were surveyed by means of an online questionnaire
(the Pricing Maturity Indicator).
The 43 questions of the Pricing Maturity Indicator are designed to
objectively determine the level of pricing maturity of an organisation,
by evaluating their performance across the different elements of the
EPP Pricing Framework.
Price strategy
Price policy & Price setting
Discount Policy
Price execution
Monitoring
Organisation & Governance
Tools & Systems
For each question, respondents receive a score which is then
aggregated to attain an overall pricing maturity score, as well as an
average score per element of the pricing framework.
The EPP Pricing Maturity Model
Level 1 - Price List Maintenance - This includes basic pricing
management, often typified by selling any goods or services to any
customer at any price.
Level 2 - Transactional Control - This involves selling the right goods
to the right customers at the right prices, achieved by means of a
number of successful margin optimisation projects.
Level 3 - Full Value Capture - This involves greater segmentation of
the customer base and selling overall solutions at value-based prices.
The pricing process is fully integrated in the commercial organisation.
Level 4 - Profit Optimisation - This involves rethinking the solutions
and revenue model in order to capture more value for the customer
and increase profitability for the company.
Page 4 of 13


European Pricing Maturity:

Perception vs. Reality

Wake up call:
56% overestimate
pricing maturity level

In this new EPP European Pricing Maturity study, we find that 56% of
respondents overestimate their current overall level of pricing maturity
while 2% underestimate it.
The study shows that organisations especially overestimate their
performance when it comes to whether or not they have reached level 3. At
level 3, pricing is expected to be embedded in commercial department
processes, working on a solid transactional control basis with close alignment
between marketing, sales and finance, resulting in value based price setting
where possible and optimal value communication and value selling.
Where 44% of respondents perceive themselves to be operating at
level 3, the vast majority of respondents still operate on level 1 or level
2 according to their actual pricing maturity results as measured in by the
Pricing Maturity Indicator.
Interestingly, the highest perceived maturity is from respondents who
have only been in a pricing function for 1-2 years. The most realistic in
their estimation of their pricing maturity are respondents with between
5 and 10 years of pricing know-how.

16% preparing to cross
the pricing chasm

64% have ambition
to cross the pricing
chasm in the next 12
months

If there was any doubt that crossing the pricing chasm is a big challenge
and that it is critical for the pricing function to become embedded in
European pricing organisations, that is swept away by the results of this
study. This European Pricing Maturity Study shows that 90% of participating
organisations are still working on level 1 or 2 – and only 16% of these
organisations have advanced to a stage where level 3 is in sight (with a
Pricing Maturity Indicator score > 2,75).
Asked for their maturity ambition within the next 12 months, 64% of the
respondents say to strive to reach level 3 (Full Value Capture). But only
16% of them seem to be ready and able to take on the challenge of
‘crossing the pricing chasm’ to get there.
Should pricing management have more realistic ambitions in their priority settings?

Figure 1: distribution of respondents according to perceived vs.
actual measured pricing maturity
Perception
Level 1: Price list

Reality

Ambition

22,31%

42,16%

2.48%

32,23%

48,04%

31,40%

43,80%

9,80%

64,46%

1,65%

0,00%

1,65%

maintenance
Level 2: Transactional
control
Level 3: Full Value
Capture
Level 4: Full profit
optimisation

Source : EPP European Pricing Maturity Study – 2013
A leading HR service provider
found themselves in a precarious
situation after the departure of
their commercial director, who
was also the owner of pricing
processes in the organisation.
The lack of focus, monitoring
and steering of pricing processes
sorely affected the pricing maturity
of the organisation.
After conducting a pricing maturity
audit, the insight they gained,
helped them prioritise and tackle
challenges in the right sequence.
In order to re-install value
capturing, they set up transactional
price monitoring as a basis for
selected margin improvement

projects and much attention was
paid to integrating pricing into the
commercial organisation.
Two years later, they were
back on track, ready to set
value-based prices on a highly
segmented level and anchoring
margin optimisation as a key strategic objective at the top levels of
the organisation.
A step-wise, basics first approach
to pricing maturity, and full
management support in embedding
the pricing function as a partner
in business, is essential in your
quest to crossing the pricing
chasm.

Page 5 of 13



Perception vs. Reality

31% have ambition
to take operational
control in the next 12
months

31% of the respondents in the EPP European Pricing Maturity Study, who are now working
in organisations where the pricing responsibility is scattered throughout the organisation,
understand that their goal is to function optimally at level 2 - they need to take control of
transactional data and use the insights gained from this to set up the first pricing and margin
improvement projects within the organisation. Typically the first successes will come rather
quickly and can be used to demonstrate the advantages of an increased and aligned focus
on pricing.

Figure 2: The EPP Pricing Maturity Model
perception

reality

64%

ambition
44%

2% 0% 2%

10%
48%
32%

42%
Level 2:
Gain transactional control
and optimise

22%
2%

“You have to walk,
before you can run,
before you can fly”

Level 1:
Price List Maintenance

Level 3:
Full Value Capturing

31%

You sell the right products
to the right cutomers at the
right prices

C
H
A
S
M

Level 4:
Profit Optimisation
You develop end-user
solutions with different
revenue models

You sell segmented
solutions at value based
prices

You try to sell anything to
anyone at all prices


Page 6 of 13



Reality vs. Ambitions

The problem is in the
“execution”

Poor performers

The results of this study indicate that European pricing practitioners have a
solid view of where they should be heading in terms of their pricing strategy.
The biggest challenge for them, lies in the implementation and execution of their
pricing strategy, and in convincing management that investment in powerful
pricing systems and tools will result in a significant enough improvement to
justify this investment.
Concepts which call for attention for organisations who currently operate on
pricing maturity levels below level 2 are:
Knowing your price elasticity (59% of respondents) – How much is the
concept of price elasticity known and used in your core commercial team?
i.e. knowledge about the responsiveness of consumers to fluctuations in
price.

Figure 3: Gap analysis across the components of the pricing
framework

Actual PMI score

Gap with Ambition

Tendering

0.86

Governance & Org
System & Tools

0.97
1.28

Monitoring
Price Execution

1.15
1.16

Discount Strategy
Price Policy Setting
Price Strategy

1.18
1.17
1.02
0.00

1.00

2.00

3.00

4.00

Measuring promotional effectiveness (51% of respondents) - To what
degree do you monitor the effectiveness of price promotions?


Economic value calculation (50% of respondents) – To what extent are
you able to calculate how much the value attributes of your products are
worth to your customer?

Figure 4: PMI scores: distribution across the components of the
pricing framework
Reality

Ambition

Price Strategy

2,34

3,36

Price Policy & Setting

2,01

3,18

Discounting strategy

2,11

3,29

Price Execution

2,00

3,17

Sales team incentives support pricing initiatives (45% of respondents) Are sales team members rewarded on meeting price goals for goods or
solutions, as well as for meeting overall sales targets?

Monitoring

2,02

3,17

System & Tools

2,00

3,28

Effective value communication (43% of respondents) - To what degree do
you understand the value components per segment? And are you able to
communicate this effectively?

Governance & Org.

2,29

3,26

Tendering

2,30

3,16

Reporting on competition intelligence (50% of respondents) - To what
degree do you have a system in place for monitoring competition
intelligence?
Life time value calculation of tenders (49% of respondents who use
tendering) - Do you compare the value of the tender to the total amount of
sales revenue generated by the average tender?

Use of pricing research for key product offerings (42% of respondents) To what degree do you employ pricing research for key product offerings?


Page 7 of 13



Reality vs. Ambitions

Highest level of
pricing maturity at
5-10 years seniority

It is reassuring to see though that generally there seems to be a
positive correlation between number of years of experience in a
pricing function and the maturity score of the different components
of the pricing framework.
The respondents in the EPP European Pricing Maturity Study are
quite well distributed in terms of number of years of experience.
There are quite a large portion of newcomers to pricing (30%), but
but at the same time we see that 38% of respondents have been
busy with pricing for more than 5 years, which is good for those who
want to establish a career in pricing.

The more people in
pricing, the higher
the pricing maturity

With 43% of respondents indicating that there are 15 people or
more working exclusively on pricing in their organisations globally,
the study shows that the the attention for pricing as a value driver in
Europe is also moving in the right direction. The number of people
working on pricing relates positively with the pricing maturity within
an organisation.

Figure 5: Number of years in pricing function and its relation to overall
pricing maturity
Distribution of

Pricing

Pricing

Pricing

respondents

Maturity:

Maturity:

Maturity:

Perception

Reality

Ambition

9,09%

1,18

1,43

3,11

1 - 2 years

20,66%

2,48

2,06

3,26

3 - 5 years

32,23%

2,23

2,17

3,22

5 - 10 years

21,49%

2,38

2,37

3,24

> 10 years

16,53%

2,40

2,19

3,21

< 1 year


Figure 6: Number of people working exclusively on pricing globally, in
relation to overall pricing maturity
Distribution of

Pricing

Pricing

Pricing

respondents

Maturity:

Maturity:

Maturity:

Perception

Reality

Ambition

1 - 3 people

14,05%

1,88

1,92

3,28

4 - 7 people

15,70%

2,37

2,02

2,94

8 - 15 people

15,70%

2,21

2,09

3,37

> 15 people

42,98%

2,44

2,30

3,30

No one works

11,57%

1,86

1,96

3,03

exclusively on
pricing


Page 8 of 13



Industry Benchmark

In this study we examine the results of all industries with more
than 4% representation amongst respondents.

Figure 7: Best represented industries PMI - Q2 2013
Top industries
Other*

The pricing maturity score calculated per industry is the average
score of all answers per respondent in that industry. The level of
pricing maturity serves as an indication of how well respondents are
capturing the full value that excellent pricing can bring to their
organisations. Knowing where you are in terms of pricing maturity
helps you determine how to prioritise your efforts to make complete
profit optimisation a reality.

Mach &
Equipment

Postal &
Logistics
Chemical
FMCG /
Retail
Telecom

This industry benchmark will allow respondents who have already
completed the online Pricing Maturity Indicator to assess where
they stand with their own unique situation in comparison to that of
colleagues within the same and/or other industries.

Automotive

HighTech
Life
Sciences

Figure 8: Top industries represented in PMI survey
Top Industries represented in PMI survey
Machinery & Equipment

28,10%

Automotive

18,18%

Life Sciences (incl MedTech)

12,40%

HighTech (incl Semiconductors)

5,79%

Telecommunications

4,13%

FMCG/Retail

4,13%

Chemical

4,13%

Postal & Logistics

4,13%

Other*

19,01%


* Industries with less than 4% representation in the EPP European Pricing Maturity Study: Travel & Hospitality, Banking & Insurance,
Consulting, Software, Consumer Goods (white, brown), Agriculture, Academic, Media, Professional Services, Apparel & Accessories

Page 9 of 13


Industry Benchmark:

Ranking Pricing Maturity Q2 2013
In figure 9, you see the difference between perceived and actual
pricing maturity scores by industry.

HighTech: highest
actual pricing maturity!
43% actually work on
level 3

Machinery: most
realistic perception of
pricing maturity

FMCG/Retail:
lowest pricing maturity,
100% work on level 1

HighTech respondents score significantly higher than any other industry
on their pricing maturity with 43% of respondents already operating on
level 3. The EPP Pricing Maturity Study reveals that 86% of respondents
in the HighTech sector have more than 15 people working exclusively
on pricing globally, with the remaining 14% having between 8 and 15
people focussing solely on pricing. They perform particularly well on
pricing strategy and pricing execution, and have advanced pricing
tools and systems at their disposal for optimising monitoring, reporting
and price guidance.
Machinery and Equipment is the most represented industry in this
study, comprising 28% of respondents. This is also the most realistic
industry, in that their perceived and actual pricing maturity is almost
a perfect match at 2,06 vs. 2,08. Interestingly, they are also the most
ambitious, wanting to grow to a pricing maturity level of 3,24 within
the next 12 months. The bulk of respondents, 53% operate on level
2, with 6% operating on level 3. The biggest difference between actual
and desired pricing maturity for this industry is in the area of monitoring
and reporting, with 26% of respondents still working in Excel sheets with
pricing knowledge dispersed throughout the organisation. In addition to
this, their biggest, most immediate challenge is to develop a system for
their sales force to capture competitor intelligence effectively.
The Fast Moving Consumer Goods and Retail sector is the only B2C
industry represented as a separate sector in this study. Surprisingly, it
shows the lowest pricing maturity in Europe according to the research
results. All respondents from this industry are, in reality, still operating
at the most elementary level of pricing maturity. Their two biggest
challenges lie in gaining control over discount practices (including
monitoring the effects of these discounts/promotions) and in making
sense of, and efficiently using the large amount of data gathered
during customer transactions.

Figure 9: Perception vs. Reality per Industry Q2 2013
Perception

Reality

Chemical

2,80

HighTech

2,62

Postal & Log.

2,80

Chemical

2,33

Telecom

2,60

Postal & Log.

2,27

HighTech

2,57

Telecom

2,24

Automotive

2,41

Automotive

2,18

Life
Sciences

2,27

Life
Sciences

2,10

Mach. &
Equipment

2,06

Mach. &
Equipment

2,08

Other

1,94

Other

1,83

FMCG/Retail

1,40

FMCG/Retail

1,76


Page 10 of 13


Industry Benchmark:

Ranking Pricing Maturity Q2 2013
In the addendum to this report, you will find a dedicated benchmark
report for each industry with more than 4% of representation in the
European Pricing Maturity Benchmark Study. On the right, you will find
an overview of the pricing maturity per industry, per aspect of the pricing
framework. The highlighted blocks indicate the aspect where the
largest gap between actual performance and future ambitions are.
For example, in figure 10, we see that the Chemical industry
respondents have the same maturity score as the Telecom industry,
for the Pricing Strategy component of the survey. However, the
Chemicals industry respondents consider this an area in which they
need to take urgent action during the next 12 months, whereas for
the Telecom industry , the focus would be more on price setting and
price execution.
53% of respondents in this study, indicated that they make use of
tendering. The biggest difference between actual performance and
desired performance are noted in the following areas:
formal life time value calculation when evaluating tender accounts,
including year-end rebates and bonusses of sales team;
putting a tender pricing strategy in place, with particular emphasis
on margin improvement plans; and
how tender information is obtained, cross-checked and validated.

Figure 10: Actual pricing maturity scores per industry, with key attention
areas per industry highlighted
Price
Strategy

Price Discount
Setting

strategy

Price
Execu-

Monitor- Systems

Gov. &

ing

& Tools

Tenders

Org.

tion
Chemical

2,45

2,27

2,80

2,27

2,15

2,10

2,68

2,05

Postal &

2,40

2,10

2,40

2,07

2,30

1,90

2,40

2,39

Telecom

2,45

1,93

1,80

1,93

2,55

1,90

2,56

2,21

HighTech

3,07

2,40

2,71

2,52

2,29

2,64

2,63

3,24

Automotive

2,18

2,45

2,03

2,00

1,97

2,23

2,09

2,35

Life
Sciences

2,30

2,00

1,93

1,93

1,67

2,07

2,40

2,27

Manuf. &
Mach.

2,23

1,98

2,12

1,99

2,06

1,91

2,14

2,24

FMCG/
Retail

1,90

1,73

1,40

1,73

1,75

1,30

1,96

2,00

Log.


We invite you to consult the addendum to this report for more detailed
industry specific results.

Page 11 of 13


Conclusion
“We still seem to
underestimate the
power of pricing as
profit driver”
- A FMCG CEO

This unique benchmarking study reveals that the majority of European
organisations overestimate their current overall pricing maturity level.
Furthermore, 90% of the organisations have not yet reached the level
where pricing is fully integrated into the commercial organisation.
This includes increasing alignment with sales, marketing and finance
department goals, and winning a seat for pricing at the general
management table.
There is a clear correlation between overall pricing maturity and
an organisation’s ability to execute pricing strategy. Therefore it is
crucial for companies to invest in developing awareness of pricing
across their organisation. Whether they decide to develop a separate
team dedicated to pricing, or choose to raise skills across the sales,
finance and marketing team around pricing management, this awareness
will provide better long term results and higher opportunities for profit.
Alongside this, if organisations really want to move beyond the level
of pure transactional control, they need to be prepared to make
significant changes in the way the organisation operates. Besides
changing the way that pricing decisions are made, it also requires a
review of how your target customers are selected, how your product
or service offerings are structured, how your value is communicated
etc. The person or team leading this process should have the full
support of all stakeholders throughout the organisation. Never walk

alone when undertaking such a far-reaching initiative.
If there was ever any doubt that ‘crossing the pricing chasm’ (moving
from looking at pricing as a project and instead seeing pricing as
an embedded function in the commercial organisation) was a big
challenge for European organisations, this European Pricing Maturity
Study shows clearly that it is probably the most important challenge
to overcome for pricing and profit optimisation management.
Companies need to invest more time and effort in change management,
but before doing so, make sure the CxO levels are on board for the
journey.
It takes time and hard work to gain the commitment and momentum
necessary to get to a higher pricing maturity level and achieve
profit optimisation. Unfortunately there are no shortcuts, you have to
walk before you can run, before you can fly…
This study can help with that process. Companies can learn a lot by
benchmarking themselves against colleagues within the same and/
or other industries.
It is time to reflect, reframe and refocus on pricing and profit optimisation
in European organisations. Use this study to start the discussion in your
company and move pricing maturity to a higher level.

Page 12 of 13

Contact
If you would like more information
or to arrange an informal discussion
on the issues raised in the EPP
European Pricing Maturity Study
and how they affect your
organisation, please contact:
Project Manager:
Nicolene Barnard
Nicolene.Barnard@pricingplatform.eu
President & Founder of EPP:
Pol Vanaerde
pva@pricingplatform.eu

For more information about the
European Pricing Platform or our
knowledge-sharing activities and
events, please contact:
Business Development:
Britt Dejager
Britt.Dejager@pricingplatform.eu
Marketing & Events:
Jessie Dhondt
Jessie.Dhondt@pricingplatform.eu

The European Pricing Platform is a not-for-profit knowledge sharing
platform focused on supporting business management, pricing and
profit optimisation professionals and CxO-level executives in Europe
across a variety of industries. Our target is to keep the pricing and
profit optimisation know-how of EPP participants up to date. Our
mission is to be the number one on- and offline pricing resource for
European decision makers. Interactive collecting, developing and
sharing of pricing and profit optimisation knowledge are the key
elements to the success of our platform.
We support our EPP participants through a variety of on- and offline
media, such as Industry Focused Forums, Chapter Workshops,
Open trainings, In-company trainings, Certified Pricing Manager®
training, Special Pricing Events, Digital library of articles, research
and whitepapers.
Click on the image to the right to read the
‘Crossing the pricing chasm’ whitepaper.
Read more about us on our European
Pricing Platform portal site.

European Pricing Maturity Study

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