Produced by Reuters Plus for
The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters.
Pricing power must be earned, not borrowed
The inflation years gave companies room to raise prices. As that cover recedes, commercial strength will increasingly depend on whether customers see enough value to keep paying.
Explore
Rising input costs provided a ready justification as widespread increases across the market changed what customers were prepared to accept. That environment also allowed fragile commercial models to go largely untested.
“We are still in an inflationary environment, and that has masked many commercial weaknesses among companies,” says Joerg Kruetten, Co-CEO of global consultancy Simon-Kucher. “Companies were able to raise prices broadly without fundamentally strengthening the value they delivered.”
The conditions are changing. Customers are more deliberate about spending as purchasing power and expectations shift across markets. Businesses must now give customers a compelling reason to pay what they charge. Simon-Kucher’s 2025 Global Pricing Study, based on more than 2,200 business leaders across 28 countries, shows the scale of the challenge. Some 86% of companies grew revenue in 2024. Only 68% demonstrated genuine pricing power by raising prices beyond their own cost increases.
For CEOs and CFOs, that gap demands an answer. What must a company build to earn sustainable pricing power?
Disclaimer: The Reuters news staff had no role in the production of this content. It was created by Reuters Plus, the brand marketing studio of Reuters. To work with Reuters Plus, contact us here.
86
of companies grew revenue in 2024
Ask a CEO how confident they are about holding prices over the next 12 months, and the answer may reveal more about the business than its latest revenue number. For several years, inflation made price increases easier to explain.
Pricing power is earned through customer value
Customer insight only creates value when it changes decisions
Profitable growth requires an integrated commercial system
Revenue growth can hide commercial decline
The decisions that shape customer value cannot be made by individual functions alone. “Commercial value creation needs to become a standing item on the leadership agenda,” Kruetten says. CEOs have to align the functions that shape the value proposition. CFOs need to look beyond the top line and measure the quality and sustainability of the growth it produces.
Commercial value creation starts at the top
Source: Simon-Kucher
Find out more from Simon-Kucher
demonstrated genuine pricing power
68
of planned price increases survived discounting and negotiation
43
%
%
%
The gap between growing and growing well
Do we know what different customers genuinely value and will pay for?
01
Are proposition, pricing, sales and customer experience managed as one commercial system?
02
Can we identify whether growth comes from stronger customer value, acquisition, price or switching friction?
03
Can our organization adapt the commercial model as customer needs change?
04
Source: Simon-Kucher
Financial services
81
%
Where pricing power is strongest
Technology, media and telecommunications
71
%
Consumer
69
%
Healthcare
68
%
Industrials
64
%
Leadership teams can test their commercial capability against four questions
Explore
Co-CEO, Simon-Kucher
For Kruetten, the answer starts with a wider definition of value. The product or service is one part of what a customer experiences. Discovery, purchasing, usage and support all contribute to what they ultimately consider worth paying for. This changes the meaning of pricing power.
Extracting value is asking customers to pay more for essentially the same proposition. Creating value means improving customers’ entire experience. It means b etter solutions, easier buying journeys, more relevant service and stronger outcomes. Companies that consistently create value earn the right to premium pricing because customers recognize the difference. — Joerg Kruetten, Co-CEO, Simon-Kucher
Commercial value creation requires companies to understand differentiated customer value, shape propositions around that understanding and capture an appropriate share through pricing. “Profitable growth also requires the agility to adapt the value proposition as markets and environments evolve,” he adds.
That ability to adapt has become critical. Kruetten says the widening performance gap is increasingly a gap in commercial capability. Value leaders continually reassess what different customer groups care about and adapt their propositions accordingly. Technology helps them identify changes in customer needs and respond faster.
Peter Fader, Frances and Pei-Yuan Chia Professor of Marketing at the Wharton School, has spent decades studying customer value and customer relationships. Asked whether companies that genuinely create value outperform those that extract it over time, his answer is “an obvious yes.” The problem, he says, is that conventional corporate reporting often makes the difference difficult to see. A business can generate impressive revenue while weakening the customer relationships on which future revenue depends.
For leadership teams, pricing power is better understood as an outcome of sustained customer value creation. The price itself reveals little about the strength of the customer relationships behind it.
Most large companies have no shortage of customer research or segmentation models. The best turn those insights into decisions about what to offer, to whom, and at what price.
Travel makes this particularly visible because customer value can shift quickly. Rosalind Hunter, Simon-Kucher’s Partner and Global Head of Leisure, Travel & Transportation, says executives from other industries often tell her they want to “price like an airline.” She thinks they are usually asking for something different. “What they really mean is they want to be more agile and adaptive,” she says.
Airlines, hotels and other travel businesses face customers whose willingness to pay can vary sharply according to the purpose and timing of a purchase. A leisure traveler planning months ahead may behave very differently from a business traveler booking late and prioritizing convenience. Commercial sophistication comes from understanding those patterns well enough to act on them.
That requires willingness-to-pay research to move beyond a periodic research exercise. Companies need evidence about which attributes customers value, how strongly they value them and how their response changes in different purchasing contexts. Transactional and behavioral data can sharpen that picture, while digital tools and AI can make the analysis faster and more granular.
Segmentation only creates commercial value when a company can act on it. Hunter regularly encounters companies with segmentations built for marketing communications or product development that cannot guide pricing decisions.
Acting on that insight may mean adapting the product itself. In some cases, the proposition needs to change before differentiated pricing becomes commercially credible. Hunter applies a simple test: can the business act on it, and does the organization believe in it? “I wouldn’t stop designing that segmentation until everyone in the business believes in it,” she says. Otherwise, it risks becoming “a nice shiny PowerPoint in a drawer that no one wants.”
The lesson from travel is highly transferable without importing its complexity. The value for other sectors lies in the discipline behind airline-style pricing, with customer evidence informing more adaptive commercial decisions.
How you segment your business for pricing and product needs to reflect how you can actionably charge different people for a product and a price. — Rosalind Hunter, Partner and Global Head of Leisure, Travel & Transportation, Simon-Kucher
Even strong customer insight can lose its value when commercial teams act on it in isolation. A pricing team may accept lower volume as the cost of a profitable price increase. If marketing is measured on volume, it may respond by increasing promotions. Salespeople rewarded for units sold may negotiate away the same increase. Each function may be doing exactly what its incentives demand while the business gives value away.
Avoiding that outcome does not require product, pricing and customer experience to sit under the same executive.
Rapid cost increases make those trade-offs harder to ignore. A company protecting a target margin may raise prices or alter the product to reduce costs. Without a clear view of the customer response, either move can weaken demand. The full cost may emerge only later, through lower repeat business or damage to the brand.
This is why integrated commercial value creation is an organizational capability rather than a pricing technique. It aligns the decisions that shape customer value with the economics of capturing it. The difference shows up in profitability. Simon-Kucher’s research found that companies running structured commercial growth programs achieve up to five percentage points higher EBIT margin than peers.
Integration also changes the quality of management debate. Hunter advocates giving leadership teams a “transparent set of trade-offs” so they can see how different commercial choices affect the business as a whole. Modeling the implications of changes in price, margin or volume can turn functional disagreements into decisions about overall economics.
What matters are processes that keep their decisions connected and clear commercial guardrails around the trade-offs they can make. — Rosalind Hunter, Partner and Global Head of Leisure, Travel & Transportation, Simon-Kucher
Leadership teams need to know what is actually driving the growth they report. Fader argues that revenue should be broken down into the customer behaviors that produce it, including acquisition, retention, repeat purchase and spend. Those patterns can reveal very different businesses behind similar top-line growth.
A company can grow rapidly by acquiring large numbers of customers who disappear quickly. Another can grow from a customer base that stays longer and buys more over time. The revenue line alone cannot distinguish between them.
For CFOs, the value is diagnostic as well as explanatory. A plateau in revenue looks very different if acquisition has slowed than if existing customers are leaving sooner or buying less. That distinction gives leadership a better basis for deciding what to do next.
Strong pricing can conceal the same problem. A business may be able to raise prices because customers face high switching costs. That can support current earnings without revealing whether customers value the relationship enough to sustain it voluntarily. The quality of revenue deserves the same scrutiny as its quantity.
Revenue isn’t a thing. Revenue is a composite of a bunch of different components. — Peter Fader, Frances and Pei-Yuan Chia Professor of Marketing, Wharton School
The decisions that shape customer value cannot be made by individual functions alone.
CEOs have to align the functions that shape the value proposition. CFOs need to look beyond the top line and measure the quality and sustainability of the growth it produces.
Financial services offers one indication of what stronger commercial capability can look like. The sector recorded the highest pricing power in Simon-Kucher’s research. Kruetten points to leading institutions using data and technology to personalize propositions, improve digital engagement and support more relevant customer interactions.
What matters is how those capabilities work together. Customer insight shapes the proposition, and technology allows companies to respond faster as needs change. Commercial execution turns that understanding into an experience customers value.
AI can accelerate this process by helping companies identify changing customer preferences and make commercial decisions faster, but its value still depends on the organization using it. Technology will do little to resolve conflicting objectives between teams or turn customer insight into action when the commercial system itself remains fragmented.
Kruetten expects the gap between leaders and laggards to widen as some companies continue to treat commercial strategy as a static annual exercise and others develop the ability to adapt continuously. Hunter reaches the same conclusion from travel, where volatile demand has forced companies to develop what she calls a more “flexible muscle.” Increasingly, that adaptability matters far beyond the sector.
The inflation years made pricing power easier to borrow. What follows will reveal which companies have built the capability to earn it.
Commercial value creation needs to become a standing item on the leadership agenda. — Joerg Kruetten, Co-CEO, Simon-Kucher
Partner and Global Head of Leisure, Travel & Transportation, Simon-Kucher
Frances and Pei-Yuan Chia Professor of Marketing, Wharton School
Joerg Kruetten
Rosalind Hunter
Peter Fader
