Many businesses will increase prices this January. For some, it’s an annual event to keep pace with rising costs while others may increase prices less frequently. Adjusting prices, up or down, has tremendous impact on profit margins. Even a 1% adjustment impacts earnings by 11% for the average company. So, with this amount of leverage, measuring even fractions of a percent adjustment is critical to understanding the impact of a price increase initiative.
We see many companies that attempt to measure price increase indirectly through margin performance. The thinking goes like this…If margins improved 2% since the price increase then it must be the increase that accounts for the margin gain. Well, maybe yes and maybe no. There are other factors that contribute to margin which can hide the pricing impact.
It doesn’t’ have to be this way. Price can, and should, be isolated from all other profit drivers. It’s easy to monitor if you have the right tools. And, it will provide insights on where the increase is under-performing. Before you launch your next price increase think about how you will measure and report the results.
To learn more about measuring price increases, get our free guide: Why Every Company Should Be Measuring Price Performance.