23.10.2025
Seeing pricing strategy as a system
Finding the right balance in pricing is a tricky thing, but getting pricing right is imperative for most businesses to succeed. In this article, STE Analytics CEO Pekka Aarnisalo encourages decision-makers to view pricing strategies as systems instead of mere numbers. That way, finding the balance in pricing becomes a much more attainable goal.
A client once told us, “We just can’t seem to get our pricing right. Every adjustment we make fixes one issue but creates another.”
It is a story we hear often:
- Raise prices to protect margins, and market share slips.
- Offer discounts to win back volume, and profitability erodes.
Competitors react, customers adapt, and what started as a simple pricing move becomes a chain reaction.
But what if I told you that pricing is not a number – it is a system.
Pricing interacts with
- customer behaviour
- competitor responses
- production costs
- internal incentives.
The balance between profitability and market share is not a straight line. It is a feedback process that constantly shifts.
In a systems thinking view, pricing is strategy in action. It reflects how a company positions itself and what it values more at a given time: growth, stability, or profit. The aim is not to pick the “right” number, but to understand the relationships that drive outcomes over time.
The Industry Pricing Rule
Across many industries, common decision rules shape how players respond to changing conditions. These rules define how producers and buyers have typically interpreted industry signals such as capacity utilisation, costs, or demand, and how those signals influence for example pricing behaviour.
In commodity markets, this takes the form of the Industry Pricing Rule:
- Floor price – set by the least efficient producers still needed to meet demand.
- Ceiling price – limited by substitutes or higher-value products customers can switch to.
- Free-market driver – the shifting balance of power between buyers and producers as supply and demand change.
Markets are never in perfect balance. Prices move within certain boundaries, continuously shaped by changes in the supply-demand balance and production costs. The aggregate industry rule defines the tunnel within which price tends to move, but each company’s position determines how it operates within it.
The two dimensions of price: list and net
In most B2B and industrial markets, “price” has two layers.
- The list price is the public signal that everyone sees. It anchors expectations, communicates value positioning, and sets the tone of the market.
- The net price is what customers actually pay after discounts, rebates, and deals.It is hidden, specific to each relationship, and reflects negotiation power, loyalty, and short-term tactics.
The tension between list and net prices shows two levels of market behaviour:
- At the surface, list prices drive perceptions and competitive messaging.
- Beneath the surface, net prices reveal the real dynamics of power and value exchange.
Understanding how these two layers interact over time is essential, and it is exactly what system dynamics helps reveal.
When the same price communicates different things
Market position shapes how each company experiences this system.
- Leaders use pricing as a signal that shapes the entire market and maintains stability.
- Challengers use it as a lever to create movement and gradually shift share.
- Followers use it for resilience, focusing on niches where value, not volume, defines the ceiling.
Therefore:
- The Industry Pricing Rule as part of the industry structure reveals the aggregate price development.
- Strategic pricing defines the internal response.
- The interaction between list and net prices is the market’s language of adaptation.
In pricing, there is no fixed balance, only continuous motion. Each price decision becomes part of the feedback loops that shape the market’s next chapter.
How well do you understand the system your prices live in? Get in touch with our experts to find out more and enhance your pricing strategy!
