What are the stages of excellence in pricing?

Pricing capability develops through five recognisable stages — Lagging, Basic, Competent, Advanced and Leading — across five dimensions: strategy and value foundations, price setting, price getting (discount control), governance, and data and performance. Most businesses sit at Basic: prices are set with some rules, but discounts leak, nobody can state the pocket price, and the sales incentive quietly rewards giving margin away. Because roughly a full percentage point of price falls straight to operating profit, moving even one stage right is typically worth several points of profit — a 1% improvement in realised price is worth on the order of 7% of operating profit for a typical business, and around double that in process industries.

The five stages, in pricing terms

• Lagging — prices are last year's number plus a percentage; discounts are approved by whoever the salesperson asks; nobody can say what any customer actually pays after rebates and terms.
• Basic — a price list and a discount policy exist, but the policy is bypassed for anything urgent, and price increases are announced without measuring how much sticks.
• Competent — discount authorities are defined and mostly followed; a list-to-pocket waterfall exists for major customers; increases are measured account by account.
• Advanced — prices are set from customer value with cost as the floor; guidance reaches sales at the point of quote; pocket margin and override rates are on a dashboard someone reads.
• Leading — pricing is a recognised capability: segmented guidance wins deals at better margins without policing, and repricing moves faster than competitors can react.

The five dimensions a pricing assessment covers

1. Strategy & value foundations — is there a pricing strategy, is customer value quantified, is competitor pricing actually known?
2. Price setting & architecture — how list prices, structures, increases and new-offer prices are decided, and how fast decisions reach the market.
3. Price getting — the waterfall from list to pocket price, discount authority, rebates that pay for behaviour, and deal guidance.
4. Governance & organisation — who owns pricing, how decisions are made, and whether sales incentives point the same way as the strategy.
5. Data, analytics & performance — one source of truth, standard analyses, tested price changes, and KPIs beyond average selling price.

What the stages are worth

The most consistent finding across nearly three decades of pricing engagements: the money is in the early moves. Decoding the price waterfall, aligning prices to cost-to-serve, and removing incentives that trade margin for volume — the Lagging-to-Competent journey — routinely recovers margin measured in points, not fractions, and requires discipline rather than software. The classic cautionary case is the reverse move: cutting price into inelastic demand, where a cut can require volume growth of 100% or more just to break even.

How to assess your own pricing

A note on what you will not find here: no email wall before the check, no sales call after it, and no private benchmark database. The report is yours; comparisons are anonymised and shown only with their sample size.

Start with three questions that predict most of the rest: Do you know your pocket price — what any given customer actually pays after every discount, rebate and term? Could you prove which customers quietly lose you money? What does your sales incentive actually reward? If any answer is uncomfortable, a structured stages-of-excellence assessment will show where you stand across 25 to 30 practices and which single move matters most.