Key Points
- Pricing adjustments are fast to implement and can unlock significant revenue and margin potential when approached strategically
- Leveraging direct customers insights to check value perception, willingness to pay are crucial especially when legacy “cost-plus” approaches are not sufficient to account for fast-changing market and macroeconomic dynamics
- Incorporating customer insights enables businesses to respond quickly to market shifts, aligning pricing with real-world value perceptions, and reducing reliance on dated assumptions and protracted levers
The Fastest Path to Unlocking Value
It takes years to build manufacturing capacity or establish supply chains, but there is one business lever that essentially requires the stroke of a pen: pricing.
Often quick to implement, yet seldom done well, pricing represents one of the most underutilized levers of business transformation. This white paper shares a perspective born from years of experience helping organizations unlock hidden value through customer-driven pricing strategies.
Why Pricing Often Falls Short
Changing pricing is often a straightforward task for the P&L leader, and establishing market-driven pricing takes months, not years. Yet, the journey from intent to impact is fraught with challenges.
In theory, final prices are determined by considering a range of factors: channel margins, market cyclicality, competitive pricing, sales incentives, and more.
In reality, we observe that many clients rely on qualitative considerations, historical pricing, industry experience, and personal judgment—often in the absence of robust data. Pricing decisions frequently default to “cost-plus” or “history-plus” methodologies, leaving significant money on the table.
Much of the existing material and strategies available in journal articles and consulting playbooks fail to address the nuanced realities of today’s dynamic and competitive market environments. They often rely on generic frameworks or historical case studies that may not reflect the unique contexts and drivers businesses face today. These approaches frequently overlook the importance of embedding direct customer feedback into pricing strategies or fail to account for the complex interplay between perceived value and actual willingness to pay. By relying on outdated or overly prescriptive methods, companies risk leaving substantial value on the table, missing opportunities to align their pricing strategy more closely with customer expectations and market realities.
A Customer-Driven Solution
The biggest and fastest improvement opportunity lies in adopting customer-feedback-based pricing. By engaging directly with customers, asking the right questions in the right way, and collecting an adequate sample size of responses—all before entering sales conversations—organizations can:
- Validate value perception
- Accurately gauge willingness to pay
- Determine price elasticity
Behind every price adjustment lies a web of challenges: aligning stakeholders, managing customer expectations, navigating system constraints, and ensuring flawless execution across tools and teams. Without laying the proper groundwork, sales-rep-led conversations inherently devolve into price negotiations, even when that’s not the intent. However, shifting to an independent, data-driven approach reframes pricing as a value conversation—not a negotiation—and ensures that pricing strategies reflect true value generated by your products and services. When approached thoughtfully, this shift transforms pricing discussions into value-driven dialogues while offering an opportunity to streamline internal execution and strengthen external stakeholder engagement.
| Area | Traditional Approach | Customer-Feedback-Based Pricing |
| Value Perception | Assumed based on internal expectations and past experience | Customized and validated directly at customer and product segment levels |
| Revenue Impact | Limited due to cost + margin expectations | Maximized by identifying willingness to pay at granular level |
| Market Responsiveness | Slow due to static assumptions | Agile and aligned with latest dynamics |
A Case in Point: The Decking Industry
Consider the market for composite decking, a material known for its superior strength, longevity, ease of maintenance, and aesthetic appeal. When first introduced, the assumption within the industry was that customers, even those owning high-end homes, had limited willingness to pay a premium for composite materials over treated wood. Based on these assumptions, industry players priced composite decking at a modest 20% premium.
A scientific survey of real customers revealed a different story. High-end homeowners, valuing the superior qualities of composite decking, indicated a willingness to pay premiums exceeding 50%. As awareness of composite decking’s benefits have grown, the initial cost of composite decking can be 2-3x treated wood, and customer satisfaction remains high.
This industry-wide misjudgment stemmed from the mental conditioning of contractors, who presumed that customers always prioritize the lowest price. Armed with accurate customer insights, we helped a leading composite deck materials company adjust its pricing strategy and achieve exponential growth in value with a simple “stroke of the pen.”
Pricing Agility: A Strategic Imperative
This example highlights a broader truth: while supply chains and manufacturing footprints cannot shift overnight, pricing agility offers the fastest response to market dynamics. By incorporating the customer perspective, organizations can move beyond legacy pricing models and capitalize on opportunities that align with true market demand.
This is not about universally raising or lowering prices. Instead, it is about precision—leveraging data to make informed pricing decisions that maximize value for both the customer and the business.
Ready to Unlock Pricing Potential?
Effective pricing strategy requires a comprehensive approach—one that balances internal and external insights. Our methodology integrates three critical components to deliver a holistic pricing transformation:
- Internal Commercial Excellence: We dive deep into your internal financials to assess account and product profitability, channel economics, and cost structures. This ensures your pricing strategy is aligned with profitability goals and operational realities
- Customer Willingness-to-Pay Research: We gather direct feedback from the market to validate value perception, identify willingness to pay, and understand price elasticity. This external perspective ensures your pricing reflects real-world demand dynamics
- Salesforce Effectiveness: We equip your sales team with the tools, insights, and training they need to confidently implement the new pricing strategy. This includes clear value understanding of value proposition and underlying drivers to ensure consistent execution across the organization.
By seamlessly integrating these internal and external elements, we deliver a pricing strategy that is data-driven, market-aligned, and actionable—empowering your organization to capture untapped revenue opportunities with confidence.
In today’s fast-changing market environment, customer-backed pricing is not just a competitive advantage—it’s a necessity. Interested in learning more about how this approach can help your organization adapt and thrive? Let’s connect!
Authors
Ali Cumber / Partner / Linkedin
Nikunj Raithatha / Principal / Linkedin
Camila Stefan / Principal / Linkedin
Nathan Martin / Manager / Linkedin