Strategic EBIT Opportunity & Risk Diagnostic
Know where pricing can improve earnings—and what could prevent you from capturing the opportunity. An 8–12-week assessment of product and customer pricing, commercial practices and organisational capability, delivering a quantified opportunity, a risk assessment and a prioritised Revenue, Pricing & Margin Roadmap.
Is your pricing strategy a competitive advantage or a hidden weakness?
Find where margin is being lost, and how to take back control.
In most B2B businesses, price has a larger effect on EBIT than any other operating driver, and it is the one least often measured. The 9PE Pricing Diagnostic measures the EBIT your pricing concedes, locates it by business unit, channel and account, identifies the causes and sets out a sequenced plan. The first actions start in month one.
What completed diagnostics have found
Typical ranges identified in completed diagnostics, per A$100m of revenue.
How mature is your pricing function?
Pricing capability develops in five levels, and margin risk falls at each one. On the evidence, most B2B industrial pricing functions sit at Level 2, even where staff rate them at Level 3. The diagnostic sets your starting level and a target.
Five levels of pricing capability
Each step up the scale lowers the margin at risk. The aim is a managed pricing function.
What does the diagnostic examine?
The 9PE canvas covers the nine elements that decide whether a business captures the price its offer is worth. Each element is scored from a staff survey, tested against sales data and interviews, and reported on a traffic-light dashboard.
The 9PE canvas: nine elements of pricing capability
Three pillars, three elements each. Every element is scored, tested and given a target.
1. Customer value drivers
What each customer segment values, and what it will pay for.
2. Pricing strategy
How price is set by segment, channel and product.
3. Customer agreements
Contracts, rebates and terms, and what each one earns.
4. Management alignment and culture
Who decides price, and whether leaders agree on it.
5. Pricing team skills
The people, skills and time given to pricing.
6. Marketing, sales and negotiation
How the field sells value and commits a price.
7. Analytics and methods
The data and methods used to set and review price.
8. Systems and tools
Pricing, quoting and customer systems.
9. Pricing structure and architecture
Price lists, discount tiers, fees and price floors.
Sample 9PE scorecard: staff rate capability above the evidence
Staff survey score for each element, with our evidence estimate, the register average and the target alongside.
- Evidence estimate
- 44%
- Register average
- 65%
- Target
- 70%
- Evidence estimate
- 39%
- Register average
- 59%
- Target
- 70%
- Evidence estimate
- 75%
- Register average
- 58%
- Target
- 70%
- Evidence estimate
- 57%
- Register average
- 62%
- Target
- 70%
- Evidence estimate
- 61%
- Register average
- 64%
- Target
- 70%
- Evidence estimate
- 42%
- Register average
- 60%
- Target
- 70%
- Evidence estimate
- 36%
- Register average
- 60%
- Target
- 70%
- Evidence estimate
- 40%
- Register average
- 58%
- Target
- 70%
- Evidence estimate
- 33%
- Register average
- 58%
- Target
- 70%
What does the diagnostic usually find?
Three findings recur from one business to the next. Leaders and sales staff see pricing differently. Staff rate capability higher than the evidence supports. And staff expect margin to improve while the practices that would deliver it are missing.
Leaders and sales staff see pricing differently
Staff survey score by element and role group, in one recent diagnostic of a B2B manufacturer and distributor.
Sales staff rate their own selling far higher than leaders do
The six survey statements with the widest differences between role groups, same diagnostic.
Staff rate capability higher than the evidence supports
Staff survey score against our evidence estimate for each element, same diagnostic.
Staff expect margin to improve. Few of the supporting practices are in place.
Share of commercial staff who agree with each statement.
What is the pricing problem worth?
In a business earning a 10% EBIT margin, a 1% improvement in realised price, with no loss of volume, lifts EBIT by about 10%. The diagnostic measures how many points the business concedes, and how many of them complexity hides.
A 1% change in price moves EBIT more than a 1% change in any other driver
Illustrative business: revenue A$100m, variable costs A$70m, fixed costs A$20m, EBIT A$10m.
Size of each problem in one recent diagnostic, per A$100m of revenue
A B2B manufacturer and distributor. Identified and annualised figures; realised results depend on implementation.
Where the diagnostic is worth most
Problem size sets how much is available. Complexity sets how much of it is hidden.
What will your executive team receive?
The diagnostic answers five questions, in this order, and finishes with the decisions needed now and a 30, 60 and 90-day plan.
How much margin is available?
One planning figure in A$ and basis points, with a conservative, base and stretch range, after rebates.
Where is it?
By business unit, channel, customer size band and named account, so you know where to start.
Why is it there?
The root causes, traced to the nine elements of pricing capability on the 9PE canvas.
What happens if we do nothing?
The margin exposed to rising costs, weak pricing power and unconditional rebates, sized as a risk register.
What do we do first?
A pricing strategy and a sequenced plan of quick wins, foundations and longer-term changes, each with an owner, a start month and a measure.
Full list of deliverables
- A one-page CEO summary: situation, complication, answer and outcome, with the decisions needed and how confident we are in each figure.
- The opportunity, sized and located: A$ and basis points by business unit, channel, size band and top customer groups, with named accounts for the first price round.
- The 9PE scorecard: a traffic-light dashboard in percentages for all nine elements, the staff survey score beside our evidence-based score, maturity by role group and a heatmap of 30 sub-categories.
- Price and margin evidence: price spreads on identical products, price-guide compliance, rebate effectiveness and customer pricing power for every account.
- A sized risk register: what doing nothing costs.
- A pricing strategy and sequenced roadmap: every action with an owner, start month and horizon.
- A measurement framework: the pricing measures, targets and owners for monthly review.
- An evidence workbook: every number in the report traces to a tab your finance team can check.
- An executive workshop: a one-day session to test the findings, agree priorities and approve the plan.
See sample outputs (simulated data)
Each chart ties to a tab in the evidence workbook, so your finance team can check every number. The examples use simulated data to show the format.
Which customers earn less margin than similar customers?
Each bubble is a customer; bubble size is net sales. Yellow bubbles earn less than the benchmark for their product mix.
Which accounts come first?
Each bubble is a customer group. Higher means a larger opportunity relative to the margin the account already earns.
Same product, different prices
Spread between the highest and lowest price paid for the same product, within one customer size band.
Where last year’s margin growth came from
Margin bridge from last year to this year, A$m.
How much pricing power do we hold with each customer?
Customer pricing power score, ranked against peers, for every account.
What happens if we do nothing?
Margin exposed if nothing changes, against the gain from acting, A$m a year.
How does the diagnostic work?
The diagnostic runs five modules over 8–12 weeks from kick-off to executive workshop. Each module feeds the next, and every figure reconciles to the files you supply.
How evidence moves through the diagnostic
Each module uses the output of the one before. Every figure reconciles to the files you supply.
A typical 12-week timeline
Shorter for a single business unit with clean data; longer for multi-entity groups.
What each module does
Capability diagnostic
A confidential survey of everyone who influences price, plus interviews with managers and sales staff, scored on the nine elements of the 9PE canvas.
Output: The 9PE scorecard, with staff scores beside our evidence-based estimate.
Customer benchmark
Compares each customer’s margin after rebates with similar customers buying the same products, and finds the categories they buy elsewhere.
Output: The pricing and margin opportunity, and the revenue opportunity from range.
Pricing engine, in diagnostic mode
Runs your data through the Blackbird engine to set allowed price ranges and score the pricing power you hold with each customer and product.
Output: A second, independent sizing of the opportunity, and the accounts that drive it.
Operations and strategy
Looks at range size, the customer tail, churn, and category and channel mix, and how each shapes price and margin.
Output: The structural issues to fix alongside price, and the pricing strategy.
Risk and upside
Sizes what doing nothing costs, and reconciles all the analysis into one planning figure with a range.
Output: A sized risk register, the roadmap and the decisions for your executive team.
What the diagnostic needs from your business
- Sales data: customer by SKU sales for the last two financial years, ideally with invoice dates and order numbers.
- Rebates and terms: rebates paid by rebate group, and the rebate terms behind them.
- Prices and costs: list prices or price guides, cost of goods, freight and credits.
- Customer and product master data: customer hierarchy, channel and segment, and product categories.
- People: about one hour per respondent for the survey, and interviews with a selected group of managers and sales staff.
- A point person to coordinate access to people and data, and one day of executive time for the workshop.
Imperfect data is the normal starting point. The diagnostic states which analyses your data supports and names the missing data to request, and data errors are often part of the opportunity. Your data stays under your control throughout and is used only for your project.
Why can the CFO rely on the number?
A diagnostic is only useful if the CFO trusts the figure. Every 9PE Diagnostic follows the same rules:
- Two independent methods. A peer margin benchmark compares each customer with similar customers buying the same products. The Blackbird pricing engine tests the same opportunity using customer and product pricing power. The plan uses the lower of the two.
- A range for every figure. Conservative, base and stretch cases are shown, with the assumptions behind each. You budget to the base case.
- Net of rebates, with no double counting. Rebates are deducted before any comparison, and opportunities that overlap are never added together.
- Like-for-like comparisons. Customers are compared within the same entity, channel and size band, so a small cafe is never compared with a national distributor.
- Missing data is named. The report states what the data can’t yet tell you, and which files would answer each open question.
- Every assumption is listed. An appendix records each assumption, the quality checks run on the numbers, and a CEO and CFO review of the findings.
What are the limits of the diagnostic?
Stated in every report, so the board reads the figures with the right weight.
- It recommends price changes. Your team makes them.The diagnostic identifies and sizes each change, and the executive team decides which to make and when.
- Identified figures are estimates.They become realised results only after implementation, measured against the baseline set at the start.
- Data quality sets the depth of the analysis.Where data is incomplete, the report says which analyses it supports and which files would answer each open question.
- Some customers will resist a price change.Each customer’s pricing power sets how far and how fast to move, and accounts with low pricing power get an account plan first.
- Software comes later, if at all.The report states whether pricing software is worth buying, and what it would need to work.
Every figure is labelled by how far it has progressed
So the board always knows whether a number is a finding, a forecast or a result.
What happens in the first 90 days?
Quick wins are actions you can start in the first one to three months, without new systems, that protect or lift margin within the quarter. The diagnostic ranks them by margin impact and speed, so the first measured result arrives within 90 days.
Sample quick-win priority matrix
Each numbered bubble is one quick win below. Top left: high impact, fast result.
See the ten typical quick wins
Agree who decides what on price
A pricing council and a discount authority matrix, with walk-away rules for tenders.
Fixes: Management alignmentPass cost increases through, and check they stick
Price supplier cost increases promptly and measure each week how much is holding.
Fixes: Pricing strategyPut price floors on quotes
Floors by price-list column, with the margin shown on every quote before it goes out.
Fixes: Pricing structureRun a first price round on the largest differences
Start with accounts paying well below similar customers on top-selling products.
Fixes: Customer value driversControl overrides at price-rise time
Freeze routine overrides during an increase window; every exception needs a reason code.
Fixes: Analytics and methodsNothing given without something back
A give-get standard so every discount is traded for volume, term, range or payment.
Fixes: Sales and negotiationMake rebates earn their keep
Add growth or mix hurdles to rebates as each agreement comes up for renewal.
Fixes: Customer agreementsLet reps commit on the spot
Clear price bands the field can agree without escalation, so deals keep moving.
Fixes: Systems and toolsRecord why you win and lose
A simple won-lost register and a shared log of competitor prices seen in the field.
Fixes: Analytics and methodsComplete the missing data
Request the invoice history, rebate terms, freight and credit data the next stage needs.
Fixes: Systems and toolsHow you will track results
The diagnostic sets the measures your executive team reviews each month, so price realisation is tracked alongside margin.
| Measure | What it tracks | Typical target |
|---|---|---|
| Price rises achieved | Achieved net price change as a share of the planned change | 80% or more |
| Price spread | High-to-low spread for the same product across similar customers | Narrowing each quarter |
| Discount approval compliance | Below-floor prices with an approval and reason code | 95% or more |
| Price-guide compliance | Share of sales at or above the price-guide level | Rising each quarter |
| Margin lost below agreed prices | Below-floor sales, unrecovered freight, unapplied fees and credits | Down 30% in 12 months |
| Cost pass-through time | Days from a cost trigger to the new price taking effect | 45 days or fewer |
| Margin shortfall against peers | Benchmark margin less actual margin for the top accounts | Half the base case in 12 months |
| Margin bridge | Change in gross margin split into price, volume, mix, cost and currency | Price contribution positive |
Targets are set for each business from its own baseline. These are typical starting targets.
What have clients achieved?
Each result below is labelled as realised (measured after implementation) or identified (sized by the diagnostic and approved for action).
EBIT recovered at Arnott’s within 12 months, after pricing and promotional decisions were centralised.
Read the case study →EBIT opportunity at Laminex. Pricing skills test scores rose from an average of 44% to over 70% after training.
Read the case study →Base-case opportunity as a share of net sales, after rebates, at a B2B manufacturer and distributor. Only one tested sale in five met the company’s own price guide.
See its survey results →Opportunities identified in ten other diagnostics
Margin and EBIT opportunities identified, by client type
Ten recent diagnostics. Clients are not named and figures are rounded.
Identified opportunities sized by the diagnostic; realised results depend on implementation. Figures shown as $ are in the client’s local currency.
Who leads the work?
The diagnostic is led by Ron Wood, who has been recruited by ASX-listed and Fortune 500 companies to set up their pricing functions, and has worked across Australia, New Zealand, South East Asia, India, the United States and the United Kingdom. You work directly with the people who do the analysis, from kick-off to the executive workshop.
Frequently asked questions
Return and value
What is a pricing diagnostic?
A pricing diagnostic is an evidence-based review of how a business sets, manages and realises price. The 9PE Pricing Diagnostic combines a capability survey and interviews with an analysis of customer-by-SKU sales and rebate data, and sizes the margin opportunity in A$ with a conservative, base and stretch range.
How much margin can value-based pricing deliver?
In a business earning a 10% EBIT margin, a 1% improvement in realised price, with no loss of volume, lifts EBIT by about 10%. Our diagnostics typically identify A$2m–9m of annualised EBIT opportunity per A$100m of revenue.
What return can we expect?
It depends on your starting point, which is what the diagnostic measures. Recent diagnostics have identified from A$3.5m to more than A$10m of annual margin or EBIT opportunity, and up to $75m in the largest business, and at Arnott’s more than A$5m of EBIT was recovered within 12 months. As a guide, clients typically find A$2m–9m of EBIT opportunity per A$100m of revenue.
How confident can we be in the numbers?
The report states its confidence for each figure. Facts about your current year reconcile to the dollar to the files you supply. Opportunity estimates are cross-checked by two methods, shown as a range, and the plan uses the lower full estimate.
Will raising prices cost us customers?
The diagnostic is designed to avoid that. Customers are only moved towards what similar customers already pay for the same products, and each customer’s pricing power sets how far and how fast. Customers with low pricing power get an account plan before any price change.
Why not do this with our own team or a software vendor?
Your team knows the business, but rarely has the time, the peer benchmarks or the independence to challenge long-standing pricing habits. Software needs a price structure and clean data to work from. The diagnostic gives you both, and says plainly whether software is worth buying.
Method and data
Is the diagnostic a survey or an analysis?
Both. The capability survey shows how pricing is managed, and the transaction data shows what it costs. The two are reported side by side, and the sales analysis never changes the survey score.
What are the five levels of pricing capability?
Pricing Insight measures pricing capability on a five-level scale. Level 1, Initial: ad hoc and reactive. Level 2, Repeatable: some basic processes, reliant on individual skill. Level 3, Defined: documented processes and tools for key activities. Level 4, Managed: KPIs, formal processes and a resourced pricing team. Level 5, Optimised: self-improving and a source of competitive advantage. Margin risk falls at each level. On the evidence, most B2B industrial pricing functions sit at Level 2, even where staff rate them at Level 3. The diagnostic sets your starting level and a target.
What if our staff rate our pricing higher than the data does?
That is the usual result, and one of the more useful findings. The difference shows where a practice exists on paper but isn’t followed in practice, which is usually where the first actions are directed.
Do you account for rebates?
Yes. Rebates are apportioned to each customer and product line and deducted before any comparison, so every opportunity is measured on margin after rebates. The diagnostic also tests whether rebates are earning their keep.
Our data is messy. Can we still start?
Yes. Checking and cleaning the data is part of the first module, and the report names any missing data that remains.
Is our data secure and confidential?
Your data stays under your control throughout and is used only for your project. Survey responses are anonymised to role group.
After the diagnostic
What happens after the diagnostic?
You keep the report, the evidence workbook and the roadmap, and can implement them yourselves. Where the data supports it, Project Blackbird sets optimised prices for every SKU and customer. Pricing Capability & Governance puts the approval rules, systems and dashboards in place. Pricing Masterclass and the Sales & Negotiation Workshops build team capability.
Who leads the diagnostic?
Ron Wood, founder of Pricing Insight, leads every diagnostic. Ron has 30 years in pricing and more than 160 clients, and has been recruited by ASX-listed and Fortune 500 companies to set up their pricing functions.
Will we be pushed into a larger program?
No. The diagnostic is a standalone engagement with its own deliverables. The roadmap says plainly which next steps are worth doing, and which you can do without us.
How soon will we see results?
The plan is built so the first quick wins start in the first month and the first measured result is reported within 90 days.
Key pricing terms
Definitions used in the diagnostic and on this page
- Realised price
- The price a customer pays after every discount, rebate, allowance, freight concession and credit. It is the number that drives EBIT.
- Price architecture
- The structure that turns list prices into invoice prices: price lists, customer tiers, the discount matrix, rebates, terms and freight rules.
- Pricing power
- How far and how fast a business can move price with a customer without losing the business, scored for every account against similar customers.
- Price spread
- The ratio between the highest and lowest price paid for the same product by customers of similar size in the same channel.
- 9PE canvas
- Pricing Insight’s nine-element model of pricing capability across Value, People and Structure, used to score how well pricing is managed.
- Cost pass-through
- The share of a supplier cost increase recovered in realised price, and how many days it takes to take effect.
- Rebate effectiveness
- Whether rebates and allowances are tied to growth, mix or range commitments, and whether they earn back what they cost.
How much margin is your pricing conceding?
A 30-minute scoping call covers your business, your range and how prices are set today, and confirms plainly whether the 9PE Diagnostic is the right first step, what it would cover, and what we’d need from you.
Book a diagnostic scoping call →Call +61 410 534 099 or email info@pricinginsight.com.au
About Pricing Insight
Pricing Insight is a Sydney-based pricing strategy consultancy, founded in 2007. It works with manufacturers, distributors, retailers and service businesses on pricing strategy, price structure and pricing operations, and has worked with more than 160 clients. Its methods include the 9PE pricing capability diagnostic, the Blackbird price optimisation engine and a 16-technique margin methodology. Pricing University, its education arm, has trained more than 5,000 executives.
Pricing Insight was founded by Ron Wood, who has 30 years in pricing, including pricing and commercial manager roles in FMCG, building materials and capital equipment. Pricing Insight is based at Level 26, 1 Bligh Street, Sydney NSW 2000, and can be contacted on +61 410 534 099 or at info@pricinginsight.com.au.
Let’s work together
Whether you're ready to optimise your pricing or want to explore what's possible, we'd love to hear from you.