25% of managers hope to avoid a devastating price war

And almost 50% of executives thought that they could effectively manage an increase of 3% or more during the next 12 months.

According to research firm Simon-Kucher, some 22% did not intend to raise their prices at all, and 5% were considering lowering them. “This is a well-known problem,” commented Dr. Jochen Krauss, Managing Director of Simon-Kucher’s Singapore office. “Many managers still don’t understand the importance of the price as THE profit lever.”

But especially in times of inflation, a price increase is not optional if a company wants to guarantee profitability. Some companies do not want to raise their prices because they think inflation effects can be counteracted by increasing their sales volume. But the actual sales volume needed in this scenario is widely underestimated, Dr. Krauss concluded.

When asked about the biggest pricing challenge of the future, 25% of executives state that avoiding price wars is most important, and 23% report that recovering cost increases is their most pressing issue. Only 16% anticipate the need to improve their current price structure.

These are the findings of a brief survey of more than 80 attendees from around the world at the recent APAC Pricing Strategy Forum titled ‘Get Ahead with Pricing: Smart Profit Growth in Asia’, which was held by the leading pricing advisor Simon-Kucher & Partners Strategy & Marketing Consultants in Singapore last week.

“It’s good that the threat of price wars has been identified,” states Dr. Krauss. “We advise our clients never to enter into price wars. There are never any winners.”

While many economies are still struggling to overcome the recent economic crisis, international managers are already looking ahead. In the face of this changed world economy the eternal question of how to boost profits has been moved out of the spotlight to make room for a much more pressing problem: Inflation makes price increases inevitable in many markets.

But how can companies best raise their prices and maintain profitability without putting off customers? These and other questions were addressed at the event organised to present international high-profile speakers, among them Hermann Simon, Naveen Kshatriya and Andreas West. It was held at the Marina Mandarin Hotel in Singapore, where guest of honour Joerg Ranau, German ambassador to Singapore, opened the forum.

“Pricing is the most important profit lever,” stated Prof. Hermann Simon, Chairman and founder of Simon-Kucher & Partners and renowned pricing expert. “More than ever before, pricing is the key for organisations to improve profitability.” The global economic crisis made the inevitability of restructuring obvious not only to managers but also to customers, so this is the perfect time to optimize pricing processes, he continued.

Naveen Kshatriya, Regional Vice President of Asia & Pacific Castrol Singapore Pte Ltd, agreed with the importance of pricing in his presentation. But he also emphasized another key aspect: sustainability. Most economies in the Asia-Pacific region are younger than their western counterparts. Many companies are still working towards sustainable growth, and implementing effective pricing is a top management task. “Executing a price strategy calls for a lot of courage and leadership skills,” he concluded.