Conventional wisdom tells us that a 6 cent increase in costs requires a 6 cent pricing increase to maintain margin - unfortunately for companies interested in maintaining their margins raising price to match costs won't be enough to keep investors happy. As more and more chemical, pharmaceutical, and other manufacturers stress their high margin %s as a justification for higher multiples in their stock price, Wall Street analysts are paying nearly as much attention to margin %s as overall results.
In this example below, a company has successfully raised priced each year to match increased costs. Their reward? A large drop in their margin % and likely a large dip in their stock price to match.
Understanding how to properly structure price increases to maintain margin is just one important consideration for an organization's pricing efforts. For guidance in this area or to understand more of the challenges to optimal pricing, feel free to
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