The Big 3 Strategic Pricing Frameworks by BCG, McKinsey, and Simon-Kucher

Most global consulting firms do not publicly disclose their strategic pricing frameworks on their websites. However, a few do. I found three that can serve as powerful tools in your professional toolkit.

Some consultancies are not concerned about competitors replicating their approaches and frameworks. This confidence is a hallmark of true thought leaders and trusted advisors. They set trends and standards across industries, strengthening their reputation while educating clients, students, academics, and practitioners. Remember BCG’s Growth Share Matrix, a portfolio management framework that helps companies prioritise their various businesses and has been studied by hundreds millions of business students since the 1970s.

With this in mind, I aimed to find similar frameworks in the field of pricing strategy. I explored official websites by 40+ global consulting firms — including the Big 4 in professional services (PwC, EY, Deloitte, KPMG), the Big 3 in management and strategy (BCG, McKinsey, Bain & Company), specialised consultancies (such as Simon-Kucher & Partners, L.E.K. Consulting), and many others.

At the end of my search I found three frameworks from industry giants that could be valuable for professionals in the field:

1. BCG’s Strategic Pricing Hexagon
2. McKinsey’s Four Pricing Strategies Framework
3. Simon-Kucher’s Corridor of Consistency

Let’s explore each of them to see how they address the complexities of building an effective pricing strategy.

#1: BCG’s Strategic Pricing Hexagon

Business leaders have a vast array of pricing theories, concepts, frameworks, and models to choose from, making the development of a pricing strategy a complex and often frustrating challenge. Recognising this need for one unified theory of pricing to inspire and guide strategic pricing development, BCG set out to create one.

This effort resulted in the Strategic Pricing Hexagon (or the Strategy Hex) — a tool that consolidates various pricing concepts into a cohesive framework, helping business leaders craft effective pricing strategies. This framework was developed by BCG's managing directors and senior partners, Jean-Manuel Izaret and Arnab Sinha. Their book, Game Changer: How Strategic Pricing Shapes Businesses, Markets, and Society, provides a detailed explanation of this theory. In this article, I will focus on the key ideas and logic of their main tool, the Strategy Hex.

To better understand the Strategy Hex, it’s helpful to follow the key steps in the development of the unified theory. These steps are visually represented in the image below.

Figure 1. The traditional pricing perspective treats cost, competition, and customer value — the key sources of information in pricing decisions — as inputs for calculating price. It means tactically setting the price by calibrating the range between the price floor and price ceiling, taking into account the competitor prices.

Figure 2. The unified theory, however, suggests considering costs, competition, and customer value not just as isolated inputs. Instead, they become powerful strategic insights when leaders examine their interactions.

Figure 3. These interactions create seven distinct fields by combining the three underlying inputs with four frameworks: price elasticity, price differentiation, game theory, supply and demand.

Figure 4. Each of the seven fields corresponds to an established pricing approach: cost-plus pricing, value-based pricing, “customizing to win” (or competition-based pricing), price elasticity, price differentiation, game theory, and supply and demand.

Figure 5. The inputs, frameworks, approaches, and market characteristics form the Strategy Hex, which provides seven distinct pricing games that together cover nearly every challenge and opportunity a business leader may encounter, enabling them to formulate a clear pricing strategy.

• Value Game:
  • Played by companies with unique, high-value offerings (e.g., high-tech, luxury, pharma)
  • Players align prices to customer-perceived value and defend that value proposition (value-based pricing)
  • Works best for unique, high-value offerings when value exceeds competitors and buyers are fragmented
• Uniform Game:
  • Played by companies such as consumer goods and retail companies
  • Players set a uniform price across all customers, balancing volume and margins (elasticity framework)
  • Suits markets with a large number of buyers with similar needs (homogenous buyers) and many comparable sellers, where elasticity helps optimise pricing
• Cost Game:
  • Played by companies such as industrial suppliers, distributors, government contractors
  • Players use a cost-plus approach to set prices
  • Applied in commoditised markets with a fragmented base of sellers, when competition is high and differentiation is minimal
• Power Game:
  • Played companies such as by high-tech suppliers with concentrated buyer and seller markets
  • Players rely on slim advantages to negotiate high-stakes deals that maintain market power balance (game theory framework)
  • Used when a market is concentrated on both the buyer and seller sides and offers show limited differentiation
• Custom Game:
  • Played by companies, including B2B suppliers, in heavily competitive, customised markets
  • Players customise discounted deals with individual customers, creating unique pricing arrangements.
  • Works where products are similar but customer needs prevent standardised pricing, and pricing is driven by competition.
• Choice Game:
  • Played by eclectic group of companies which includes software suppliers and some restaurant chains
  • Players rely on behavioural economics to help customers self-select from a structured line-up of offerings (price differentiation)
  • Especially important when offers have limited or no marginal costs.
• Dynamic Game:
  • Played by companies including airlines, sports teams, e-commerce retailers, logistics firms
  • Players use AI and human judgment to share value with customers in real-time based on supply and demand signals, capturing the optimal price point as conditions change (dynamical pricing)
  • Works for businesses with adjustable capacity, perishable products, or fluctuating demand from a broad base of customers

Most markets align well with one of the pricing games, though some may suit multiple games, allowing leaders to choose the best approach based on their competitive strengths.

Figure 6. Each game has a corresponding functional area within the organisation that is best suited to lead it: pricing, marketing, product, sales, senior executives, finance, and data science. The pricing governance model determines how a company manages and allocates business intelligence and pricing authority across the organisation.

Figure 7. Each game is also influenced by six well-defined forces — innovation, commoditisation, customisation, digitalisation, fragmentation, and concentration — which can shift a market or company toward a different area of the Strategy Hex.

The creators of the unified theory believe that the Strategy Hex “enables business leaders to simplify pricing conversations, accelerate and improve decision making, and increase their confidence that they have chosen the best long-term strategic path for their company”.

#2: McKinsey’s Four Pricing Strategies Framework

In March 2015, McKinsey’s Kevin Chan, Jay Jubas, Berenika Kordes, and Melissa Schilling published an article titled "Understanding Your Options: Proven Pricing Strategies and How They Work." They analysed hundreds of companies and pricing approaches and identified four pricing strategies that deliver sustainable results.

The framework is presented as a 2x2 matrix with two axes:

• Horizontal axis: Degree of innovation (Incremental vs. Radical)
• Vertical axis: Primary impact objective (Sales growth vs. Margin improvement)

This matrix leads to four different possibilities or primary pricing strategies that companies can employ to enhance profitability.

1️⃣ Margin Expanders (Margin Improvement + Incremental degree of innovation): This strategy focuses on incremental improvements within existing segments, products, and pricing structures. Companies can achieve this by implementing small, regular price increases, segmenting their offerings, applying surcharges, passing on changes in service costs, and pricing in additional sources of value, such as services. This approach allows for gradual profitability expansion without disrupting competitive dynamics or customer expectations.

• Example: Dow Corning launched a budget-friendly brand, Xiameter, for price-sensitive customers, protecting its main brand’s profits while expanding its reach.

2️⃣ Profit Disrupters (Margin Improvement + Radical degree of innovation): Companies in new categories or those facing significant threats may adopt bold, disruptive pricing strategies to define or defend their business models. These approaches often involve creating new models that reduce risks or increase benefits for both the customer and the supplier. Examples include profit-sharing with customers, pricing agreements that factor in risk (e.g., cost-of-materials triggers), and changes in the unit sales model (e.g., per hour of use vs. per box).

• Example: BASF switched from charging per gallon of paint to charging per painted car, which improved paint quality, reduced consumption, and raised profits and market share.

3️⃣ Revenue Drivers (Sales Growth + Incremental degree of innovation): This strategy uses pricing as a tool to drive revenue growth by attracting new customers and deepening penetration within the existing customer base. Tactics include offering introductory prices to bring in new customers, implementing subscription models to build on an installed base, contracting to extend the lifetime value of a customer, and bundling products or services to increase revenue per customer.

• Example: Expensify offers a “freemium” model, giving free basic services and charging for premium features, which helped it grow quickly.

4️⃣ Sales and Pricing Pioneers (Sales Growth + Radical degree of innovation): This approach leverages pricing to reinforce or enhance a company's brand positioning. By setting prices that reflect the brand's value proposition, companies can strengthen their market position and customer perception. This strategy often involves premium pricing for high-quality or innovative products, thereby aligning the price with the brand's image and the perceived value by customers.

• Example: Rolls-Royce’s “power-by-the-hour” model charges airlines per flight hour instead of selling engines outright, allowing for more predictable costs. By monitoring engine performance, they offered tailored service packages, increasing customer loyalty and revenue.

The authors of the matrix recognise, that not every strategy will be relevant or even feasible for every company. It depends on market context, business strategy, and own capabilities. However, they recommend to periodically review strategic options with that matrix, because it may sparkle new ideas about how to approach pricing.

Which strategy to choose depends on the depth of a company’s commercial capabilities, its customers, the marketplace, and the appetite for risk.

#3: Simon-Kucher’s Corridor of Consistency

Simon-Kucher & Partners, regarded as the world’s leading consultancy specialising in pricing and growth, in August 2023 published a framework which they use to help their clients with price positioning. This framework is called the ‘corridor of consistency’.

Simon-Kucher, famous for popularising value-based pricing and Pricing Power concept, use one guiding principle:

Your price position should reflect the value you deliver.

And the ‘corridor of consistency’ visually represents this principle: the price charged is must be in line with the value delivered.

• Firms need to take a holistic view of both axes — value and price — and not limit themselves to a mere price-to-cost relationship analysis.
• It is fine to have low or high price, but as long as the benefits delivered are commensurate: low cost offers, middle market offers, premium offers.
• The vertical axis (price) should compile both monetary (price and any additional fees) and non-monetary costs (e.g., the number of steps and documents required to sign up, amend or cancel a product).
• For the horizontal axis (value), it’s essential to see value from the consumer’s perspective, as value is in the eye of the beholder. This requires gathering external data, often through customer surveys and interviews, to understand the consumer's viewpoint.

Thus, it’s a very simple and straightforward framework covering price positioning part of the price strategy.

Final Thoughts

In closing, I would like to share a few reflections on the pricing frameworks discussed in this article.

I liked the idea of one unified theory of pricing. However, I find the framework proposed by BCG’s authors to be overcomplicated, debatable, and somewhat confusing. Here are a few specific questions it raises:

• Why is supply and demand associated only with the "dynamic game"? This is a foundational law of economics and should be considered in any "game."
• Why is elasticity viewed as the result of an intersection between cost and value? Price elasticity of demand is a ratio that shows how much demand for a product changes when the price of that product changes; cost is not directly relevant.
• Why is elasticity separated from the law of supply and demand framework?
• If this hexagon encompasses all pricing theory, where is the place for behavioural economics and the psychology of pricing?

One respectful strategy expert from my LinkedIn network referred to this framework as “the hexagon of random terminology.” I believe there’s some truth to that…

McKinsey’s four pricing strategies didn’t offer much value, in my opinion. Sophisticated descriptions of the strategies with fancy names and examples that could apply to various strategies. Nice to know, perhaps, but nothing critical to remember.

The only framework I would include in my revenue management toolkit is Simon-Kucher’s “corridor of consistency.” It provides straightforward and effective guidance on price positioning.

That said, these are just my subjective thoughts and may differ from others’ views. I hope you found at least one framework in this article that could be useful in your professional life. Happy pricing strategising!

REFERENCES

1. Grant Petty and Andy Zoltners. "The Unified Theory of Pricing." Boston Consulting Group, 2023, https://www.bcg.com/publications/2023/the-unified-theory-of-pricing. Accessed 7 Nov. 2024.

2. Kevin Chan, Jay Jubas, Berenika Kordes, and Melissa Schilling. "Understanding Your Options: Proven Pricing Strategies and How They Work." McKinsey & Company, 1 Mar. 2015, https://www.mckinsey.com/capabilities/growth-marketing-and-sales/our-insights/understanding-your-options-proven-pricing-strategies-and-how-they-work. Accessed 7 Nov. 2024.

3. Thomas Brinkmann and Sarah Baker. "UK Consumer Duty: Measuring, Evidencing, and Achieving Fair Value Pricing." Simon-Kucher & Partners, https://www.simon-kucher.com/en/insights/uk-consumer-duty-measuring-evidencing-and-achieving-fair-value-pricing. Accessed 7 Nov. 2024.

4. Laura Ray and Peter Smith. "Pricing for Profit: Best Practices in Price Management." Simon-Kucher & Partners, https://www.simon-kucher.com/en/insights/pricing-profit-best-practices-price-management. Accessed 7 Nov. 2024.