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Pricing is one of the most impactful levers in the private equity value creation toolkit. Across dozens of engagements with middle-market private equity portfolio companies, I’ve consistently found that strategic pricing improvements can unlock significant revenue and margin, often with limited disruption.
That’s why, at Grant Thornton Stax, we developed a focused 2–3-week Pricing Diagnostic to rapidly identify, size, and prioritize pricing opportunities post-close.
This article introduces our Pricing Diagnostic product, offering an overview of the approach, typical pain points, and how this effort is an efficient and effective initial step to maximize a portfolio company’s pricing potential.
Pricing Deserves a Seat at the Strategy Table
Pricing is a powerful lever companies can pull to realize their strategic ambition. Yet, many companies set pricing reactively and use discounts too liberally to win customers. Further, pricing strategy is rarely reassessed as their product portfolio and customer mix evolve.
As we help sponsors and management teams understand the breadth and magnitude of pricing opportunities within their portfolio companies, we encounter several common challenges:
- Over-reliance on discounting to drive growth: Particularly in the earlier stages of growth, companies often overuse discounting to acquire and/or retain customers. Ultimately, these discounts persist beyond their intended purpose, unfavorably impacting customer lifetime value and the company’s ability to scale margin.
- One-size-fits-all pricing: Without a clear understanding of segment-specific needs and willingness-to-pay, companies have difficulty effectively differentiating their pricing. This lack of differentiation can simultaneously misprice entry-level offers for price sensitive customers while also leaving money on the table in premium segments.
- Misalignment with customer perceived value: Pricing is often determined using internal inputs (e.g., cost) or basic competitor benchmarks, rather than being grounded in customer perceived value. This disconnect can instigate suboptimal outcomes such as lower customer satisfaction and missed upsell opportunities.
- Commercial ownership and governance: Pricing is the economic link between business strategy and revenue, yet it often exists in a functional gray zone without an assigned owner and divorced from ongoing performance measurement. In the absence of clear accountability and structured processes, it is challenging for companies to maintain both internal alignment to their goals as well as external market alignment.
As part of the Pricing Diagnostic, we analyze internal company data and conduct stakeholder interviews to uncover what’s working, what’s not, and which opportunities offer the highest risk-adjusted return. This helps our clients prioritize these pricing opportunities within a broader value creation program.
From Baseline to Action: The Pricing Diagnostic Approach
Grant Thornton Stax Pricing Diagnostic is structured around three core pillars, each critical to understanding the size and scope of the pricing opportunity:
1. Baseline Pricing Analytics
We start by establishing a fact base around current performance, analyzing:
- Sales trends by key attributes (e.g., customer segment, channel)
- List-to-net waterfall to uncover sources of price leakage
- Margin and discount variability across like-for-like cohorts
This initial effort often reveals unexpected, meaningful opportunities for price optimization.
2. Hypothesis-Driven Deep Dives
With the baseline established, we align with management on a couple of high potential areas worth exploring. For example:
- Impact of promotions and rebates on purchase behavior and customer lifetime value
- Efficacy of existing discount programs on driving incremental volume
- Alignment of existing customer segmentation to willingness-to-pay
These deep dives allow us to stress test key hypotheses to quickly determine if it’s worth investing more organizational time and energy.
3. Opportunity Sizing and Prioritization
Finally, we translate findings into an actional set of opportunities by quantifying their financial impact and recommending an implementation sequence, from immediate "quick wins" to longer-term structural changes. Example opportunities include:
- Recommendation to revise price points and tiers for a subset of high potential product and customer combinations
- Revised discounting framework that maximizes net price and increases win rates
- Segment-specific pricing strategies that leverage the company’s value proposition to differentiate from competitors
Our opportunity matrix provides a clear, data-backed view of how pricing can contribute to growth and profitability, helping PE sponsors and management teams align on next steps.
What Comes Next: From Diagnostic to Execution
While the 2–3-week diagnostic is self-contained, it also serves as a critical input to a potentially broader pricing transformation effort.
Based on our findings, Stax often helps clients move into a second phase focused on pricing strategy and optimization. This may include primary customer research to assess purchase drivers and price elasticity or the development of new pricing architecture and bundles.
In many cases, we also partner with clients to implement changes, test in-market pilots, and build enduring pricing capabilities within the organization.
The Grant Thornton Stax Advantage
Whether you're looking to validate a thesis pre-close or accelerate growth post-close, pricing deserves your attention. We’d be happy to walk you through the approach, share examples, and explore how pricing can unlock value in your portfolio. To learn more, reach out to Alex directly by clicking here.
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