The Profitability Play: Pricing Strategy For What's Next
gettyWhen markets become less predictable, pricing decisions can determine whether a company can sustain revenue growth. Government policy shifts, supply chain and energy disruptions, and aggressive competition can quickly change what customers are willing to pay and what it costs to serve them. Pricing strategies built around yesterday’s conditions can leave businesses reacting too slowly to protect profitability.
At the heart of every business lies an engine that drives revenue, profitability and customer engagement. And at the heart of that engine is the balance between the thing you build and the value it delivers, defined by the price.
Getting pricing right increases customer satisfaction while creating an agreement of value. In other words, it produces the profit that powers your future. Yet, many businesses fail to fully leverage this advantage.
Unprofitable growth occurs when companies sacrifice too much margin to win business. Heavy discounting may help meet short-term revenue targets, but it leaves less profit to invest in product development and other building opportunities, all while competitors are supporting sustainable market position.
Much of the unpredictability is beyond the capacity of traditional planning since it comes from broad macro trends and the action of external parties. Organizations must embrace an economic and business landscape that’s defined not by punctuated periods of change but rather by systemic unpredictability that’s a permanent aspect of the global economy. The pricing strategy must become more responsive, more situationally aware and more resilient to sudden changes.
Companies can no longer rely on expansion alone to succeed—pricing is the only business function that directly translates the value you create into the revenue you keep.
Yet, according to a Simon-Kucher global study, “only 40% of companies rank pricing as their top profit lever.” At the same time, the price realization rate (when businesses can actually get the prices they set) has fallen to 43% as buyers push back on pricing models and demand higher discounts and competitors compete aggressively for customers.
The gap between intended prices and realized prices is where businesses can lose profitability without fully understanding why. A company may have a well-defined pricing strategy on paper, but if sales teams routinely discount to close deals, pricing guidance arrives too late or changes go unnoticed, the intended results may never materialize.
AI-based pricing technology can help companies respond more quickly, but its value depends on the quality of the information behind its recommendations and how effectively those recommendations reach the people making commercial decisions.
Data-driven pricing guidance can make a measurable difference in how sales teams negotiate. According to a 2024 study from Bain, 74% of sales representatives and managers with data-driven deal guidance said they were confident negotiating prices with customers.
For those businesses that are able to fully engage AI in their pricing approach, the results can be significant: In the same Bain study, businesses utilizing AI in this way reported a 12% higher win rate.
This need to engage pricing with business operations applies in both directions. Feeding pricing guidance to sellers at the point of interaction with a buyer helps drive up margins. And feeding win/loss data into your AI model creates pricing models that meet customer and market changes as they occur.
Building a pricing strategy that can provide profitable growth in even the most turbulent macroeconomic landscape is clearly a powerful competitive and financial tool.
1. Businesses should start by identifying where price realization breaks down. Compare planned prices with actual transaction prices, then examine discount patterns by product, customer segment, sales team and deal outcome. This helps distinguish between discounts that are necessary to remain competitive and those that are eroding margins without meaningfully improving win rates.
2. Use AI to accelerate pricing agility but do so with a clear view on data quality and provenance. Before deploying AI-driven pricing, assess whether the underlying data is accurate, current and representative of the customers being served.
3. Ensure the pricing strategy is operationally integrated into go-to-market functions. Assign clear ownership for reviewing that feedback and updating pricing guidance so the strategy evolves alongside the market.
An effective and enabled pricing function is an essential part of a company’s overall commerce engine. This approach embeds pricing as part of a clear chain of commerce data and processes, helping businesses respond to changing markets and winning deals without sacrificing profit.
Forbes Technology Council is an invitation-only community for world-class CIOs, CTOs and technology executives. Do I qualify?
