Many business leaders believe that rising energy costs, inflation, or global supply chain issues are the biggest threats to their pricing decisions. But what if the real problem lies within their own operations?
James, for example, is the CFO of a mid-sized food distribution company in Australia. His team is struggling with rising expenses—fuel costs for logistics, supplier price increases, and growing wages. Like many executives, he assumes the culprit is rising energy prices. He supports industry lobbying for increased fossil fuel production, believing cheaper energy will ease the pressure. But months pass, and even as energy prices fluctuate, the company’s costs remain high.
The problem? James, like many business leaders, is caught in the pricing illusion—believing external factors alone determine profitability while overlooking smarter pricing decisions that could truly make a difference.
>Download Now: Free PDF Future Proof Your Pricing Strategy
How Old Assumptions Quietly Sabotage Your Pricing Decisions
Many businesses still rely on outdated beliefs that no longer fit reality. These beliefs shape their pricing decisions every day. We see this often. A team assumes a problem is caused by one thing, but the real driver sits somewhere else. Because the belief feels familiar, no one questions it. As a result, pricing decisions drift further away from what the market actually needs.
Take costs. Many leaders still believe the only safe way to price is to mark up costs. It feels logical. Yet costs today move faster, and supply chains shift overnight. When the team sticks to this belief, they treat cost changes as the main factor in pricing decisions. But customers buy value, not spreadsheets. Outdated cost beliefs create rigid pricing.
Some businesses also hold old assumptions about supply chains. They assume variability is temporary, so they avoid adjusting prices until “things settle.” But volatility is now normal. When a business waits too long, margins disappear. The belief that stability will return soon leads to slow and weak pricing decisions.
Even assumptions about competitors cause trouble. Leaders often believe competitors always set the rules. They copy prices without checking whether the competitor is profitable or desperate. This belief kills strategic thinking. It results in pricing decisions driven by fear, not insight.
Then there are beliefs about the causes of business challenges. Some leaders blame slow sales on price alone. They cut prices quickly, assuming this will lift demand. But the real issue may be product fit, service quality, or customer experience. The wrong assumption triggers the wrong pricing decision.
When leaders challenge these inherited beliefs, clarity returns. Better pricing decisions follow. So, rethink everything you treat as “the truth.” Pricing improves the moment your beliefs get updated.
The Fossil Fuel Fallacy
Across Australia, large businesses in manufacturing, logistics, and retail are pushing for more fossil fuel production, claiming it will lower operational costs. But this is short-term thinking. Climate-driven disruptions—bushfires, floods, and supply chain breakdowns—play a bigger role in price hikes than energy costs alone.
Take the 2019–2020 bushfires. Major supermarket chains and wholesalers faced shortages as roads were cut off, crops were destroyed, and distribution centres struggled with stockouts. Grocery prices soared, not because of energy costs, but because supply chains were thrown into chaos. Increasing fossil fuel production won’t stop these disruptions—it may worsen them by accelerating climate change. Businesses that rely on short-term fixes like lower fuel prices risk pricing instability in the long run.
Capability Building Programmes For Pricing & Sales Teams!
The Pressures Businesses Overlook When Making Pricing Decisions
James’s real challenge isn’t just his company’s electricity bill—it’s the hidden costs in his supply chain and operations. Rising supplier costs, inefficient logistics, and outdated procurement strategies all affect the bottom line. Many large companies make the mistake of focusing on external cost pressures while ignoring internal inefficiencies.
A smarter approach? Businesses should regularly audit their costs to identify inefficiencies. For example:
- Are logistics optimised to reduce fuel consumption and shipping delays?
- Can supplier contracts be renegotiated for better bulk pricing?
- Are inefficiencies in warehouse operations driving up costs unnecessarily?
Instead of focusing on fossil fuel prices, businesses should improve efficiency and streamline costs they can control.
How Many Pricing Analysts Do you Really Need? 👩💼 Podcast Ep. 40!
Why Lowering Prices Isn’t the Answer
When James sees declining profit margins, his board suggests price reductions to remain competitive. But this only shrinks margins further, requiring higher sales volume just to maintain revenue. This is the price-cutting trap.
Many large corporations assume lowering prices will drive market share growth. In reality, it often leads to a race to the bottom, eroding profitability across the industry. Instead of cutting prices, businesses should ask: How can we create more valuable pricing decisions?
For example:
- Premium service offerings (e.g., faster delivery or customisation for high-value clients) to justify higher pricing.
- Subscription models to build recurring revenue instead of price-based competition.
- Strategic partnerships with suppliers to secure preferential rates and reduce exposure to cost fluctuations.
What Factors Should Influence Cost Management and Pricing Decisions?
The biggest long-term pricing challenge is climate change’s impact on supply chains. Floods damage crops, heatwaves disrupt logistics, and extreme weather events drive up costs. If businesses ignore these realities, they risk constant price shocks.
A proactive business can:
- Diversify suppliers across multiple regions to reduce dependency on any single market.
- Invest in renewable energy and efficiency upgrades to reduce exposure to volatile energy prices.
- Adopt AI-driven forecasting to predict supply chain risks and mitigate cost spikes.
By tackling real pricing pressures rather than chasing quick fixes, businesses can build more stable and predictable pricing models.
Pricing Recruitment For Pricing Managers!
How to Make Long-term Decisions to Avoid the Wrong Pricing Policy
Pricing isn’t just about reacting to cost increases—it’s about planning for the future. Businesses that integrate sustainable pricing decisions and strategies today will be more competitive tomorrow.
Steps to future-proof pricing:
- Understand your costs – Regularly review expenses to identify areas for savings.
- Know your customers – Price based on perceived value, not just cost-plus pricing.
- Adopt strategic pricing models – Use tiered pricing, bundled services, or value-based pricing.
- Optimise operations – Cut unnecessary expenses, invest in automation, and reduce inefficiencies.
- Plan for sustainability – Reduce reliance on volatile markets by adopting energy-efficient practices and securing diverse suppliers.
〉〉〉 Get Your FREE Pricing Audit 〉〉〉
Moving Beyond Illusions to Smarter Pricing Decisions
Companies like James’s will continue to struggle if they focus only on external costs like energy prices while ignoring internal strategies. The real solution to pricing challenges lies in efficiency, value-based pricing, and future-proofing business operations.
Instead of chasing temporary fixes, smart businesses rethink pricing for long-term success. By focusing on value, efficiency, and adaptability, they can maintain profitability—even in an unpredictable economy.
Is your business pricing strategically, or are you chasing illusions? If you’re ready to rethink pricing for long-term success, let’s have a conversation. Reach out today, and let’s explore how smarter pricing can future-proof your business.
For a comprehensive view of maximising growth in your company, Download a complimentary whitepaper on Future Proof Your Pricing Strategy.
Are you a business in need of help aligning your pricing strategy, people and operations to deliver an immediate impact on profit?
If so, please call (+61) 2 9000 1115.
You can also email us at team@taylorwells.com.au if you have any further questions.
Make your pricing world-class!
