A Pricing Strategy That’s Good for Businesses and Good for Society

A Pricing Strategy That’s Good for Businesses and Good for Society

Pricing discussions can feel like an endless technical exercise, divorced from a larger strategy. There are dozens of theories, concepts, frameworks, and equations to choose from and little clarity about how to make sense of it all. Worse, many leaders assess these options based on faulty assumptions: thinking that pricing is a zero-sum game or that there is one “right” price for every transaction.  

Amid all the confusion, companies have huge opportunities to expand the pie—both for themselves and their customers.   

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Pricing is powerful. The right strategy can maximize value creation, deepen customer relationships, reshape businesses—and benefit society.  

BCG’s new book, Game Changer: How Strategic Pricing Shapes Business, Markets, and Society, distills decades of client work and research into a unified theory of pricing. Coauthored by BCG’s Jean-Manuel Izaret and Arnab Sinha, it provides a clear playbook for leaders—helping them unlock strategic pricing decisions with greater speed, efficiency, and impact. 

The Strategic Pricing Hexagon 

The core of the theory is the Strategic Pricing Hexagon (The Hex). The Hex integrates multiple elements—business intelligence, economic frameworks, market characteristics, market forces, and organizational authority—into seven pricing games. 

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The term “game” may seem curious, but it’s apt. All games have their own unique set of rules and ways to win. Similarly, each of the seven games in the Strategic Pricing Hexagon represents a unique pricing approach: 

  • The Value Game. Players in the Value Game—such as high-tech, luxury goods, and pharmaceutical companies—succeed when they align the prices of their unique solutions with customer value and then obsessively direct their marketing efforts to defend that value and shape demand.  
  • The Uniform Game. Players of the Uniform Game—such as consumer goods companies and retailers—win when they optimize the same prices for all customers by carefully weighing the tradeoffs between volume and margin.  
  • The Cost Game. Players of the Cost Game—such as some industrial suppliers, distributors, and government contractors—succeed when they use greater efficiency to create degrees of freedom in commoditized markets with a fragmented base of sellers. Players use a cost-plus approach to set prices when these characteristics apply. 
  • The Power Game. Players of the Power Game—such as many high-tech suppliers—rely on slim advantages to negotiate high-stakes deals that preserve the market’s balance of power.  
  • The Custom Game. Players of the Custom Game—which include a wide range of B2B suppliers—win by customizing discounted deals with individual customers amidst heavy competition. The negotiated terms, conditions, and supplemental offerings make each deal unique, even when the underlying products from each supplier seem similar.  
  • The Choice Game. Players of the Choice Game—an eclectic group which includes software suppliers and some restaurant chains—rely on behavioral economics to help their customers self-select from a well-structured lineup of offerings. How prices compare to each other matters far more than the individual prices themselves.  
  • The Dynamic Game. Players of the Dynamic Game—including airlines, sports teams, e-commerce retailers, and logistics firms—have begun to apply artificial intelligence together with human judgment to share value with customers in real time in response to supply and demand signals.  

Most markets fit very well to one of the games, but some may fit to more than one game. This is not a flaw but rather an opportunity: leaders can decide which game to play depending on their competitive advantages. 

More Than the Bottom Line 

A strategic approach to pricing can generate real benefits for companies through more consistent and reliable pricing decisions and increased revenue over the long term. But there are societal benefits as well. 

Fairer and more equitable pricing can generate benefits for companies—and for society overall.   

For example, fairer and more equitable pricing can make health care more accessible. These same concepts can apply to other economic factors, such as wages and salaries—potentially reducing income disparities. Some companies that sell sustainability products and services can use pricing to boost adoption, leading to environmental benefits. Nonprofits often shy away from the concept of pricing, but smart pricing can actually optimize access, consumption, and performance, leading to greater social impact.  

In this way, thinking more strategically about pricing can boost the bottom line for companies—and for societies overall.   

More of our latest thinking on pricing:  

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Kal Ghosh, CPA, CMA (US)

Founder @ Peak Performance Strategies | Private Equity

1y

A new way to look at pricing based on time-tested concepts. At the end of the day, the goal is to explore the maximum pricing levels that the market will bear. Unless there is a strategic decision to be a loss leader to capture market share or the company operates in a monopolistic environment. #strategicfinance

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Archana A Mukherjee

Indian , Engineer , Production and Operations Management Professional

1y

#Reading, a lot of information, a lot of learning.

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