Six Sigma Pricing (paperback)

Financial Times
ManMohan S. Sodhi / Navdeep S. Sodhi  
Total pages
September 2007
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Pricing is now the #1 worry facing today's business leaders, according to a major survey by McKinsey. This book introduces a breakthrough Six Sigma-based approach to the pricing discipline: one that can systematically eliminate pricing-related revenue leaks, driving new profits straight to the bottom line without alienating customers. Authors Mohan Sodhi and Navdeep Sodhi wrote the seminal Harvard Business Review article that first revealed how great companies are using Six Sigma in pricing. In this book, they explain why pricing is surprisingly well-suited to a Six Sigma approach; then walk through every step of executing a Six Sigma pricing initiative. Readers will learn how to define pricing "defects" (such as sales made at unauthorized prices); gather and analyze relevant pricing data; analyze existing pricing-agreement process; identify failures of control; implement modifications that don't create onerous approval processes; and then sustain and extend pricing improvements into the future. The book reflects the authors' own leading-edge experience implementing Six Sigma pricing, as well as insights from companies ranging from Citibank and Lloyd's of London to 3M.


The first and only guide to applying Six Sigma to your #1 business challenge: pricing.  

  • Take greater control of pricing, eliminate "pricing leaks," and drive new revenue straight to the bottom line.
  • A systematic, start-to-finish approach: from defining defects through implementing controls through sustaining and extending improvements.
  • Requires no previous experience with Six Sigma.

Table of Contents




Motivation and Context


1 Why Pricing Operations and Six Sigma Pricing

    1.1 Introduction

    1.2 Who Should Read This Book and How They Should Read It

    1.3 Why Target Pricing Operations

    1.4 Pricing Challenges and Six Sigma Pricing

    1.5 What Six Sigma Pricing Is

    1.6 What Six Sigma Pricing Is Not

    1.7 Summary


2 Profit Leaks from Inefficient Pricing Operations

    2.1 Introduction

    2.2 Examples of Price Leaks

    2.3 Why Price Leaks Occur

    2.4 The Role of the Pricing Function

    2.5 Summary


3 Case Study-Pricing Operations and Six Sigma Pricing

    3.1 Introduction

    3.2 Background

    3.3 Six Sigma

    3.4 Define

    3.5 Measure

    3.6 Analysis

    3.7 Improvement

    3.8 Control

    3.9 Results

    3.10 Summary


PART II Basics-Pricing Operations and Six Sigma


4 Price and Pricing

    4.1 Introduction

    4.2 Different Types of Prices

    4.3 Different Levels of Pricing

    4.4 Summary


5 Pricing Operations

    5.1 Introduction

    5.2 Processes and Roles

    5.3 List Price Increase

    5.4 New Product Launch Pricing and Lifecycle Maintenance

    5.5 List Price Increase Due to Increase in Input Costs

    5.6 Promotions

    5.7 Discount-setting and Concession Process

    5.8 Analysis, Report, and Review Processes

    5.9 Summary


6 Six Sigma

    6.1 Introduction

    6.2 Historical Background

    6.3 Why Six Sigma and Not Five or Seven

    6.4 Misperceptions of Six Sigma

    6.5 Application of Six Sigma to Non-manufacturing Situations

    6.6 Five Steps of a Six Sigma Project (DMAIC)

    6.7 Summary


7 Tools for Six Sigma

    7.1 Introduction

    7.2 Tools for the Define Phase

    7.3 Tools for the Measure Phase

    7.4 Tools for the Analyze Phase

    7.5 Tools for the Improve Phase

    7.6 Tools for the Control Phase

    7.7 Summary


Part III Doing a Six Sigma Pricing Project


8 Selecting a Six Sigma Pricing Project

    8.1 Introduction

    8.2 Acme

    8.3 Summary


9 Define Phase

    9.1 Introduction

    9.2 The Charter

    9.3 Customers and Their Requirements

    9.4 High-level Process Map

    9.5 Define Checklist

    9.6 Acme

    9.7 Summary


10 Measure Phase

    10.1 Introduction

    10.2 Process Map

    10.3 Data Collection Plan

    10.4 Acme

    10.5 Summary


11 Analyze Phase

    11.1 Introduction

    11.2 Process Analysis

    11.3 Root-Cause Analysis

    11.4 Data Analysis

    11.5 Acme

    11.6 Summary


12 Improve and Control Phases

    12.1 Introduction

    12.2 Improve

    12.3 Control

    12.4 Final Presentation

    12.5 Acme

    12.6 Summary


PART IV Enterprisewide Deployment.


13 Deploying Six Sigma Pricing Enterprisewide

    13.1 Introduction

    13.2 Developing an Enterprisewide Plan for Six Sigma Pricing

    13.3 Goals for Enterprisewide Deployment

    13.4 A Starting Toolset for Six Sigma

    13.5 Pitfalls and Challenges

    13.3 Summary


14 The Takeaway






Back Cover

Apply Six Sigma to Your #1 Business Challenge: Pricing


“Six Sigma is well known for having helped companies save billions of dollars. This book is the first to show us how to use it on the revenue side of the equation to generate profitable growth. This step-by-step guide will be an instant classic-a seminal book on a topic critical to profitability.”

-Robert Cross, Chairman and CEO, Revenue Analytics Inc. and author of Revenue Management


“Six Sigma Pricing provides companies with a practical toolkit to improve their price management. The authors show executives how to use Six Sigma tools in their pricing processes and instantly improve profits and their bottom-line. This is a truly 'must-have' resource for managers everywhere.”

-Eric Mitchell, President, Professional Pricing Society


Many companies have developed solid sales strategies- but without equally good pricing operations, those strategies alone will not add a dime to the bottom line.


The goal of pricing operations is to consistently control price deviations in transactions and contracts over time and across customer segments. This goal of ensuring the prices are not too low or too high in different transactions relative to guidelines lends itself perfectly to Six Sigma. Using the authors' breakthrough Six Sigma-based approach, you can systematically eliminate pricing-related revenue leaks, driving higher profits without alienating customers. You'll learn how to define pricing “defects,” gather and analyze relevant pricing data, review pricing-agreement processes, identify and control failures, implement improvements, and then ensure continuous, ongoing improvement in price, profits and customer satisfaction.


The book reflects the authors' pioneering experience implementing Six Sigma pricing. Whether you're a business leader, strategist, manager, consultant, or Six Sigma specialist, it will help you or your client recover profits that have been slipping through the cracks in pricing operations.


Learn why Six Sigma Pricing makes sense

    Why you should target pricing operations, and how to do it 


Identify profit leaks from inefficient pricing operations

    Why “sloppy pricing” occurs, how to find it, and how to root it out 


Illuminate your current pricing processes, so you can improve them

    Understand your market-facing and internally focused pricing processes pertaining to product launch and lifecycle price management, price increases due to escalation in costs of raw materials, promotions, and discounting


Set up your pricing operations for continuous improvement in line with your pricing and sales strategy 

    Use Six Sigma to improve and control processes, ensuring alignment with agreed-upon strategy for pricing and sales


Create an organization that is successful at pricing

    Align different functions and levels of the company to achieve targeted profits


Navdeep S. Sodhi is managing director of Six Sigma Pricing, a consulting firm based in Minneapolis and London. He has more than twelve years of global pricing experience spanning several industries: airlines, medical device, and B2B manufacturing. He has an MBA from Georgetown University. He has applied Six Sigma and Lean methods to pricing in his work for industrial manufacturers. He is the recipient of the Award of Excellence from the Professional Pricing Society. His articles on pricing have appeared in the Harvard Business Review, Quality Digest, The Pricing Advisor and the Journal of Professional Pricing. Navdeep is based in Minneapolis.


ManMohan S Sodhi is professor and head of Operations Management and Quantitative Methods at Cass Business School, City University London. Before coming to Cass, he consulted full-time for ten years at senior levels with Sabre, Accenture, and Scient in a variety of industries including chemicals, consumer-packaged goods, and airlines in the US and in Europe. His managerial articles have appeared in the Harvard Business Review, MIT Sloan Management Review, The Wall Street Journal, Supply Chain Management Review, and other prestigious journals. He has a Ph.D. from the Anderson School of Management at University of California, Los Angeles (UCLA) with previous degrees in manufacturing and in industrial engineering. He is based in London.