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For industrial manufacturers, pricing is still the most powerful profit lever they control, yet in many organisations it remains underdeveloped, under-governed, and underrepresented at the top table.

Cost volatility, shorter innovation cycles, and intensifying competition from low-cost and Chinese players are eroding the traditional premium positioning many European and US industrials have relied on for decades. At the same time, customers are less willing to pay for features that have become good enough industry standards, and increasingly judge suppliers on total cost of ownership rather than upfront price.

At Manufacturing Pricing Excellence 2026 – Power of 50, AlixPartners representatives Thorsten Lips and René Clotten revealed how pricing can mature from a back-office calculation into a visible, disciplined commercial system.  

The Shrinking Premium and the Value Challenge  

The historic recipe of many industrial goods manufacturers consists of premium products, premium specifications, and premium prices. But things are starting to shift due to increasing pressures:

• Customers are more comfortable with good enough performance and brands, especially when the price gap versus premium offerings is significant.  
• Features that once justified a surcharge are now industry standard or offered freely by low-cost competitors.  
• Buyers are broadening the lens to total cost of ownership, weighing machine price, spare parts, service contracts, uptime, and lifecycle costs as a single equation.

This creates a fundamental value challenge. Value-based pricing only works if customers recognise and care about the value being priced. When a previously differentiating feature becomes standard, it should fall out of the economic value estimation. Many companies are slow to make that shift in their pricing logic and product offering.

The hard part is not the theory but the recognition. Organisations that have won for years with a certain premium model often take too long to accept that the basis of their advantage has changed. Regular, structured conversations with customers about what they actually value and what they are no longer willing to pay for are still surprisingly rare. Without that insight, list prices, discount structures, and value arguments all drift out of sync with market reality.

The implication is that premium pricing is no longer guaranteed by brand and engineering quality alone. It must be continually re-earned by aligning offerings, service models, and commercial narratives with what specific customer segments truly value today.  

From Negotiation Chaos to Commercial Discipline  

Another structural issue is discipline. Pricing may be set centrally, but it is realised or quietly eroded in thousands of daily negotiations at the frontline.

Three weaknesses are common:

• Every sale becomes a negotiation, but sales teams lack robust guardrails and tools, leading to inconsistent discounts and margin leakage.  
• Contracts, especially long-term agreements, are poorly adapted to volatility in raw material and labour costs. Raw material clauses are often the only protection against swings in input prices.  
• Sales incentives are heavily weighted to revenue, not profitability, encouraging volume at the expense of margin.

Governance and commercial discipline can change behaviour. By implementing pricing performance scores, making them transparent, and extending best practices from the excelling teams to the others, commercial discipline becomes part of organisational performance. 

Margin protection does not always require sophisticated models. Often, it starts with transparency, governance, and willingness to address commercial behaviour.

Monetising What Matters: Segmentation, Offers, and Risk  

Once discipline is in place, the question becomes how to monetise different forms of value more intelligently.

Segmentation power  

A pricing leader recognises that not all customers should follow the same pricing logic. Some buy on uptime, responsiveness, and flexibility. Others buy almost exclusively on volume and unit price.

Treating both with the same list price and discount structure wastes margin on value-sensitive customers and risks losing price-sensitive ones. Introducing segmentation means:

• Defining customer clusters by needs and buying behaviour, not just size or geography.  
• Building differentiated price architectures for each segment.  
• Equipping sales with clear rules so that segmentation translates into real behaviour in negotiations.

Value clarity  

Many industrial companies struggle to articulate why their product is, for example, 8% more expensive than a competitor’s. Sales teams default to vague claims of being more premium, which are unconvincing in tough negotiations.

A more efficient approach focuses on a small set of measurable value drivers that explain performance differences in concrete terms: output, reliability, energy efficiency, uptime, service responsiveness, or integration capabilities. These drivers then feed both product pricing and the sales narrative.

Offer architecture and monetising risk  

Industrial manufacturers are still at an early stage in structuring offers the way software companies do with tiered packages. Yet many have a rich set of additional functions, service levels, and digital tools that are either bundled for free or only loosely monetised.

Re-thinking offer architecture involves:

• Separating base machine functionality from optional or segment-specific features.  
• Designing good/better/best configurations that reflect distinct value and willingness to pay.  
• Unbundling elements such as guaranteed response times, uptime commitments, or supply availability, and pricing them as risk and reliability services rather than hiding them inside the hardware margin.

This is particularly relevant as customers sharpen their focus on lifecycle cost and operational risk. Many are, in effect, buying uptime and predictability. If suppliers do not price these elements explicitly, they carry the risk for free.

The Cautious Rise of Digital as a Revenue Pool  

Digital services are often presented as the next major revenue pool for manufacturers. In practice, monetisation remains modest and uneven.

In many machinery segments, digital offerings still function primarily as an enabler to sell more hardware, spare parts, or service. Customers expect basic connectivity and data access as part of the package, and are reluctant to pay separately unless there is a clear operational or financial benefit.

This does not mean digital cannot be monetised. It means pricing leaders need to:

• Distinguish between digital features that are now table stakes and those that create measurable, recurring value.  
• Avoid reflexively giving away all digital capabilities as freebies to support equipment sales.  
• Test pricing models that link fees to outcomes (e.g. reduced downtime, energy savings) or to the risk being transferred from customer to supplier.

The monetisation challenge is as strategic as it is technical. If digital is always treated as an embedded sweetener, it will be very difficult later to reset customer expectations and charge for it.

AI-Enabled Pricing: Automation as a Means, Not an End  

Artificial intelligence inevitably enters the pricing conversation, but its most immediate role is pragmatic rather than visionary.

Many industrial companies face frequent supplier cost changes, complex product portfolios with tens of thousands of SKUs, and fragmented, inconsistent historical pricing data across regions and channels.

Manually embedding all relevant factors into spreadsheets quickly turns pricing teams into administrators rather than strategists. AI and machine learning tools can add value by:

• Structuring and cleansing large volumes of transactional data.  
• Identifying price corridors and outliers for low-frequency, high-value parts.  
• Generating guidance for target prices and discounts that reflect patterns in realised prices and customer behaviour.

It’s important to view AI as an enabler that frees capacity for strategic work rather than as a black box that does pricing.  

Conclusion

Three priorities emerge for industrial leaders serious about margins in a disrupted market:

• Make pricing visible at the top. Treat it as a core business metric, not a downstream technicality. When boards review revenue and cost, they should also review price realisation, discounting behaviour, and the impact of recent decisions.  
• Eliminate hidden discounting. Put simple governance in place so that global field organisations act according to central intent. Transparency tools, rankings, and aligned incentives can close the gap between list prices and actual margins.  
• Translate differentiation into defendable price logic. Be explicit about where your products and services are genuinely different, and convert that into clear, quantifiable value arguments that sales teams can use in real negotiations.

Pricing will not be fixed by a single project or tool. It is a system of leadership attention, commercial discipline, analytical capabilities, and frontline behaviour. In an environment where disruption has become normal, the companies that treat pricing as a strategic capability rather than a periodic exercise will be the ones that protect and grow their margins.