Pricing committee: the governance most mid-market firms lack

The arithmetic is old but still under-used. McKinsey's analysis of the world's 1,200 largest listed companies found that a one-percentage-point improvement in average price leads to an 8.7 percent increase in operating profit. It added that a well-executed pricing-improvement programme often yields price increases of two to four percentage points or more, and that sustaining a long-term price advantage may represent roughly 15 to 25 percent of a typical company's total profits. The study is from 2010, and the exact elasticity will differ by company, but the underlying logic has not changed: price falls straight to the bottom line, volume and cost do not.

Attitudes lag the arithmetic. Simon-Kucher's Global Pricing Study 2025, which surveyed more than 2,200 business leaders across 28 countries and 39 industries, found that only 40% of companies rank pricing as their top profit lever. Bain and Harvard Business Review, in a 2018 survey of more than 1,700 B2B companies, found that roughly 85% of respondents believed their pricing decisions could improve. The two findings together describe a familiar position: leaders know pricing matters, believe they could do it better, and have not changed how it is managed.

For a mid-market CFO the implication is practical. The gap is unlikely to close through analytics alone. The Bain survey found that only 26% of companies use pricing software, but a tool without an owner and a process simply produces more reports. The governance question comes first: who decides, on what evidence, within what limits, and who is accountable for the outcome. Until those are answered, additional data produces additional debate rather than additional profit.

It is worth being precise about what the McKinsey figure does and does not say. It is an average across large listed companies, calculated as the effect of a one-percentage-point price improvement with volume and costs held constant. In practice a price rise affects volume, and the net effect depends on customers' sensitivity, which varies sharply between products. The figure is best used to size the prize and to justify attention, not to forecast what a specific increase will deliver. The committee's job is to find where price can rise with little volume loss, and where it cannot.

What to do: estimate what one percentage point of realised price is worth to your own operating profit, using last year's accounts. Put the figure at the top of the board paper that proposes a pricing committee. A number expressed in pounds is more persuasive than a statement about best practice.

The Bank of England's Decision Maker Panel, based on 2,083 responses to its June 2026 survey, shows that UK firms reported realised annual own-price growth of 3.8% in the three months to June and expected 4.1% over the year ahead. Annual wage growth was 4.1% in the same period, and firms expected it to ease to 3.5%. Year-ahead CPI inflation expectations were 3.7%, with three-year-ahead expectations at 2.9%. Costs, wages and price expectations are all running above the Bank's inflation target, and firms are planning accordingly.

These are averages across the economy, and a mid-market firm's own position will differ. The point for a CFO is the direction and the gap. If wage growth runs at 4.1% and firms expect to raise their own prices by 4.1%, margins are being defended rather than rebuilt. A company that raises prices by less than its cost inflation is cutting its margin, and a company that raises them uniformly is leaving selective opportunities unused. Neither outcome is a decision; both are defaults.

The same Panel data warn against complacency about expectations. Firms expect their own-price growth to edge up from the realised 3.8% to 4.1%, which suggests they are still building price increases into their plans. In such an environment, a customer who receives increases from many suppliers becomes more attentive to each one. Poorly coordinated increases, applied inconsistently by different salespeople, invite exactly the negotiation and churn that a committee is designed to prevent.

Expectations have also moved against firms. In the three months to August 2025, the Panel found that firms expected CPI inflation of 3.3% one year ahead; by the three months to June 2026 the figure was 3.7%. Two surveys are not a trend, and we would not over-read the change, but the direction implies that cost pressure has not faded as many planned. Budgets built on a benign inflation assumption in 2025 may already be short, and a committee provides the forum in which that gap is acknowledged and answered.

Pricing governance is also a labour-market matter. With annual wage growth at 4.1% and firms expecting 3.5% over the next year, the cost of the people who sell, deliver and support a product is rising in a way no supplier discount can offset. Service businesses, whose cost base is mostly labour, are particularly exposed. They cannot easily substitute inputs, and their customers know it. A committee that sets policy on pass-through of labour costs, including how and when to communicate increases, protects margins and also relationships.

What to do: compare your own planned price increase for the next 12 months with the Panel's 4.1% expectation and with your own cost inflation by category. If the plan sits below the cost increase, the committee's first task is to decide where the gap will be recovered and by whom.

Simon-Kucher's 2025 study draws a distinction that matters. Nearly 80% of companies used price increases to cope with rising costs and preserve profit margins last year, and on average they raised prices by 9%. Some 82% were able to pass through cost increases, but only 68% demonstrated sustainable pricing power. Passing on a cost is a reaction that works when every competitor faces the same cost. Pricing power is the ability to hold a price when they do not, and it is the thing worth building.

Realisation is where plans leak. The Simon-Kucher brochure reports that average price realisation has dropped to 43%, held back by customer resistance and rising competition, and that 64% of companies now report higher pressure on prices, up from 57% in 2021. A company that announces a 9% increase and realises 43% of it is effectively delivering well under half of that, before any further discounting by sales. The gap between list price and the price that is invoiced and collected is the territory a pricing committee is meant to manage.

Contract mechanics add to the leak. Simon-Kucher found that 53% of companies use contract indexation, but only half enforce it consistently. In B2B businesses with multi-year contracts, an indexation clause that is not applied is a free option given to the customer. It is also a governance failure in the plainest sense: a decision was taken, written into the contract and then not carried out because nobody was responsible for checking. The finance team usually knows the problem exists; it rarely has the authority to fix it.

Customer resistance and competition are the two stated causes of weak realisation, and they require different responses. Resistance is best handled by preparation: segmenting customers by value and sensitivity, timing the increase, and explaining the change in terms the buyer recognises. Competition is best handled by differentiation, which means understanding what customers actually value and what they would give up. Both are commercial judgements that benefit from cross-functional challenge, and both are reasons why a CFO-chaired committee is better placed to decide than a salesperson negotiating alone.

Only 24% of companies planned a price increase above inflation in 2025-26. That suggests many are betting on volume or cost savings rather than price, even though the McKinsey arithmetic favours price. What to do: measure your own price realisation over the past year, from list through discounts and rebates to invoiced and collected price. If the answer is not available in a week, that is itself the first finding for the committee.

The vendor-sponsored Pricing Excellence Report from Vendavo and Copperberg, reporting 2022 respondents, found that pricing was owned most often by sales (24%), marketing (21%) or a business line (18%). The survey is dated and sponsored by a pricing software vendor, so we treat it as indicative rather than definitive. It does match what we see described repeatedly in mid-market companies: pricing is held by whichever function has the most direct contact with the customer or the list, and finance acts as scorekeeper.

Each default owner has a predictable bias. Sales optimises for closing the deal and is rewarded for volume. Marketing optimises for positioning and list price consistency. A business line optimises for its own margin and may cut price to win a customer that benefits a different division. Finance sees the consolidated result but lacks the commercial authority to change a quotation. None of these biases is irrational. The problem is that nobody is paid to weigh them against each other, which is the work of a committee.

There are signs organisations are responding. The same report found that 34% of organisations said they would recruit more professional pricers, up from 22% the year before. That is a sensible move for larger companies, but a mid-market firm may not have a full-time pricing function and does not need one to start. A committee can use the finance lead, the commercial director, a senior salesperson and an operations voice to do the work part-time, with a pricing analyst added once the volume of decisions justifies it.

Ownership also determines how pricing is discussed. Where sales owns price, the conversation is usually about the next deal. Where finance owns it, the conversation is usually about last quarter's margin. A committee shifts the conversation to the portfolio: which customers, products and channels earn their price, and which are subsidised. That shift is where the largest and most durable gains are found, because individual deals are rarely the problem. Systematic patterns, such as a segment that always receives the maximum discount, are.

What to do: write down, for each of the last ten significant pricing decisions, who made the decision, who was consulted and who was held accountable for the result. If the answers vary widely or are unclear, you have the evidence for formal decision rights.

The main design risk is that a committee becomes a slow, universal approval gate. We would avoid that by limiting the remit to four things: setting price policy and the limits within which sales can act; approving exceptions above a defined threshold; deciding price changes, including annual increases, indexation and list changes; and reviewing performance. Routine quotations within policy do not go to the committee. If the committee is seeing more than a small proportion of deals, its thresholds are set too low.

Tiered decision rights are the practical device. The first tier covers deals within agreed discount bands, which sales can approve alone. The second covers larger discounts or non-standard terms, approved by the commercial director and finance lead within an agreed time. The third covers strategic accounts, price-list changes and policy exceptions, which go to the full committee. Each tier needs a stated response time. If sales cannot get an answer quickly, they will bypass the process, and the governance exists only on paper.

Membership should be small and senior. The CFO or CEO chairs, because the decisions trade margin against growth and need someone with authority over both. The commercial leader, a finance business partner and an operational representative complete the core. Where the company has a pricing analyst, that person prepares the papers. Meetings should be monthly at first, fortnightly during an annual price round, and short: one page of data, a list of decisions needed and a record of those taken.

Escalation rules deserve more thought than they usually receive. Decide in advance what happens when the committee and the sales director disagree, and when a customer threatens to leave over an increase. The CEO should be the final arbiter, and the record should capture the reasoning so that the same dispute does not recur. Over time, the record of exceptions becomes the best evidence for changing policy: if one type of exception is approved every time, the rule should move rather than be repeatedly overridden.

What to do: draft a one-page terms of reference with the remit, tiers, members, meeting rhythm and escalation path. Get the CEO and sales director to sign it before the first meeting. A committee that lacks the sales director's agreement will be ignored by the people it most needs to influence.

A committee without data degenerates into opinion. We suggest five measures, each calculable from existing systems. First, price realisation: the share of a planned increase that reaches invoiced and collected price. Second, discount leakage: the difference between list and net price, by customer segment and salesperson. Third, indexation enforcement: the share of eligible contracts where the clause was applied. Fourth, win rate and volume by price band, to test whether discounts are buying volume. Fifth, margin by customer cohort, to show where price is not covering cost-to-serve.

Benchmarks help, with care. Simon-Kucher reports 43% average realisation and that 53% of companies use contract indexation but only half enforce it consistently. Those are survey averages across industries, not targets. The aim for a mid-market firm is to find its own baseline, to see whether it is moving in the right direction, and to identify the segments or sales behaviours that cause the largest gaps. Comparing with a global average can be a useful sense check but should not set the target.

The data usually exist but sit in different systems: the quote in the CRM, the invoice in the ERP, the contract in a document store. Assembling the monthly pack is therefore the committee's first piece of work, and it is often the first time the finance and commercial teams look at the same table. Do not wait for a perfect data warehouse. A spreadsheet reconciled by the finance business partner is adequate for the first six months and exposes the data problems worth fixing.

Reporting should be visual and brief. A one-page dashboard showing the five measures against the previous quarter, with commentary on the two largest movements, will be read; a thirty-page pack will not. The CFO should also report to the board each quarter on realised price and margin, framed in pounds of operating profit rather than percentages. This keeps the committee connected to the objective it exists to serve, and it ensures the board notices when the discipline slips.

What to do: produce a baseline for all five measures for the last four quarters before the first meeting. Do not set targets until you have seen two months of results. Early targets set without a baseline are either missed, and ignored, or trivially met, and meaningless.

The route does not need an expensive transformation. In the first 30 days, establish the facts: measure price realisation and discount leakage, map decision rights as they currently operate and quantify what a single percentage point of realised price is worth. In days 30 to 60, draft the terms of reference, the tiers and the metric pack, and gain the sales director's agreement. In days 60 to 90, hold the first two meetings, make the first decisions under the new rules and report back to the board.

Expect resistance and plan for it. Sales teams will read a committee as a constraint on their autonomy. The answer is to show that the structure speeds up legitimate decisions, by giving clear thresholds and rapid responses, and to involve the best-regarded salespeople in setting the bands. The McKinsey and Simon-Kucher evidence on what price is worth provides the commercial argument; a respected commercial leader provides the credibility.

Be modest about tools. Bain's survey found only 26% of companies use pricing software, but the evidence we have does not show that software alone changes outcomes. For a mid-market company, we would start with the committee and the metric pack, and consider software when volumes of quotes or complexity of price lists clearly exceed what a spreadsheet and the CRM can handle. The sequence matters: governance first, tooling second.

After the pilot, review three things honestly. Did decisions get faster or slower? Did realised price improve against the baseline? Did the sales team use the process, or route around it? If the answer to the third question is no, the thresholds or response times need adjustment before anything else. If the answer to the second is no after two quarters, the issue is probably policy rather than governance, and the committee should examine whether list prices, discount bands or contract terms are the underlying cause.

What to do: put the committee on the board agenda for the next meeting, with the estimated value of a point of price, the baseline measures and the draft terms of reference. Ask the board for a decision, not a discussion: approve a 90-day pilot, name the chair and agree the date of the first review.

Karter McKinley supports mid-market leadership teams through our strategy and transformation service: measuring realised price, mapping decision rights, drafting the committee charter and building the first monthly metric pack. We stay involved through the first decision cycles so that the structure is used rather than filed.