Testing prices in TIC

Freitag, 13. Oktober 2023 | Neuigkeiten

We are in exceptional times. Inflation is rampant, and companies find themselves under pressure to maintain profitability. Prices are changing, that much is certain, but it’s a tug-of-war between suppliers and customers. The question is, what is the right price, for who?

For an industry that's all about testing, it’s surprising how little work and trialling has been done to get this balance right. M&A and operational fine-tuning has long been the top of the corporate agenda in TIC, in pursuit of faster growth and the creation of platforms. It’s now time to get the price right, partly because the growth levers of the past require more effort.

At its core, the TIC industry has many characteristics that make it well-suited for pricing optimisation. There are an immense variety of tests, logistics complexities, limited price awareness, and emerging digital delivery models. This is a good environment for nuanced and segmented pricing that responds to customers’ specific attitudes and needs – rather than treating all customers the same (but don’t confuse thoughtful, segmented, pricing with ad-hoc sales-team driven discounting). Being bold will pay off in markets where there is high cost of failure, switching is risky, and ESG tailwinds drive higher willingness to pay. In other areas, “good” may be just maintaining prices without churn.

Now is the time to make a move. Inflation means prices are changing , more for some service lines and companies, than others. This creates confusion and many companies don’t know what is reasonable. Is 15% reasonable for this specific test? Or 5%? The right answer comes down to negotiation and understanding your customers’ position. So, a crude “blanket price increase” does a poor job in capturing the value on the table.

Testing prices can also be about designing volume incentives to gain share of wallet or to experiment with different pricing models (e.g. partial subscriptions as the offer starts to include a more value-add digital platform). It can be very effective, and largely remains unexplored.

So, what should you be aiming for? There’s (almost) always more opportunity than expected, given how underexplored the lever is and the scope for sophistication. The key is doing the best you can in the market context, and keeping your strategic objectives in mind. Recent examples we have seen include a certification provider who was able to raise prices by >20%, while another inspection player was just about able to hold on to inflationary increases – yet both outcomes were much better than the wider market (and the ingoing expectations).

The good news? It’s easy to find out. At OC&C we combine TIC expertise with extensive B2B pricing experience across industries – a different approach: strategic, pragmatic, and tailored to you.

Want to find out more? Get in touch:

Pontus Lofquist, Associate Partner

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