Procurement Glossary
Pricing: Definition, methods and strategic importance in Procurement
November 19, 2025
Pricing is a central process in procurement that involves the creation and determination of prices for goods and services. It has a significant influence on the cost structure and competitiveness of companies. Find out below what pricing means, which methods are used and how you can use them strategically for your purchasing success.
Key Facts
- Pricing is based on supply and demand as well as cost-based calculations
- Transparent price structures enable better negotiating positions
- Market mechanisms and supplier strategies have a significant influence on pricing
- Digital tools are increasingly supporting price analysis and forecasting
- Pricing is closely linked to risk management and cost control
Contents
Definition: Pricing
Pricing refers to the process of creating and setting prices for goods and services on markets.
Basics of pricing
Pricing is based on various factors and mechanisms. At its core, supply and demand act as price-determining forces, while additional influences shape the final pricing.
- Market mechanisms through supply and demand
- Cost-based calculations by suppliers
- Competitive situation and market position
- External factors such as commodity prices and regulation
Pricing vs. pricing
While pricing describes the entire development process, pricing focuses on the active determination and evaluation of prices by buyers. The price inquiry is an important pricing instrument.
Importance of pricing in Procurement
For purchasing organizations, understanding pricing is essential for successful procurement strategies. Cost driver analyses and should-costing approaches enable buyers to better understand the price structures of their suppliers and negotiate in a targeted manner.
Methods and procedures
Various methods enable buyers to analyze and influence pricing processes.
Cost-analytical procedures
Cost analysis methods help to analyze the price structure of suppliers and determine fair prices. These methods create transparency about the actual cost drivers.
- Clean sheet calculations for new products
- Cost-breakdown analyses of existing products
- Benchmarking with market prices and competitors
Market-based price determination
Market-based approaches use external references and indices to evaluate prices. These methods are particularly widespread for raw materials and commodities.
- Price index linkage for volatile markets
- Spot market analyses and forward transactions
- Supplier comparisons and tenders
Negotiation strategy approaches
Strategic negotiation management combines analytical findings with tactical elements. Price negotiation techniques are used in a targeted manner to achieve optimal conditions.
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Key figures for controlling pricing
Relevant key figures enable the monitoring and control of pricing processes in Procurement.
Price deviations and variances
The measurement of price variances shows the effectiveness of the pricing analysis. Purchase price variances document deviations between planned and actual prices.
- Absolute and relative price deviations
- Trend analyses over periods of time
- Category and supplier-specific evaluations
Market price benchmarks
Regular market comparisons evaluate the competitiveness of the prices achieved. These key figures support strategic decisions on supplier selection.
Savings measurement
The quantification of price optimizations through various types of savings documents the success of pricing activities and justifies investments in analytical methods.
Risks, dependencies and countermeasures
Pricing involves various risks that can be minimized by taking appropriate measures.
Market volatility and price fluctuations
Unpredictable price movements can significantly affect budgets and calculations. Particularly in the case of raw material-intensive products, strong fluctuations are possible.
- Implementation of price bands to limit risk
- Diversification of the supplier base
- Building up strategic stocks
Information asymmetries
Unequal distribution of information between buyer and supplier can lead to unfavorable prices. Suppliers often have better cost transparency than their customers.
Dependencies on individual suppliers
Strong dependencies reduce negotiating power and can lead to excessive prices. Bundling levers and alternative procurement sources create counterbalances to supplier power.
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Practical example
An automotive supplier analyzes the pricing of steel components using clean sheet costing. Material costs, production times and overheads are evaluated separately. The analysis shows that the supplier is 15% above the calculated costs. Through targeted negotiations based on cost transparency, the buyer achieves a price reduction of 8%. In addition, a raw material escalation clause is agreed in order to manage future price volatility.
- Creating cost transparency as a basis for negotiation
- Achieve price reductions through well-founded argumentation
- Hedging long-term price risks with clauses
Trends & developments around pricing
Pricing is subject to continuous change due to technological innovations and market dynamics.
Digitization of price analysis
Artificial intelligence and machine learning are revolutionizing pricing analysis. Algorithms can process large amounts of data and recognize price patterns that would be impossible to detect manually.
- Automated market price monitoring
- Predictive analytics for price forecasts
- Real-time pricing and dynamic adjustments
Sustainability aspects in pricing
Environmental and social standards are increasingly influencing pricing. Suppliers are integrating sustainability costs into their calculations, which requires new valuation approaches.
Volatility and risk management
Increasing market volatility requires more flexible pricing models. Price escalation clauses and hedging strategies are becoming increasingly important in order to manage price risks and create predictable cost structures.
Conclusion
Pricing is a complex process that significantly influences the success of procurement. Buyers can use analytical methods and strategic negotiation skills to shape pricing in their favor. Digitalization opens up new opportunities for more precise analyses and data-driven decisions. Successful pricing strategies require continuous market observation and the willingness to adapt proven approaches to changing conditions.
FAQ
What is the difference between pricing and pricing?
Pricing describes the entire process of creating prices on the market through supply, demand and other factors. Pricing, on the other hand, refers to the active determination and evaluation of prices by buyers using analyses and comparisons.
Which factors have the greatest influence on pricing?
The most important influencing factors are supply and demand, production costs, competitive intensity, raw material prices and regulatory framework conditions. The market power of suppliers and customers also plays a decisive role in the final pricing.
How can buyers influence pricing in their favor?
Buyers can achieve better prices through well-founded cost analyses, market comparisons and strategic negotiations. Transparency regarding cost drivers, alternative procurement sources and long-term partnerships with high-performance suppliers are important.
What role do digital tools play in pricing analysis?
Digital solutions enable automated market price monitoring, predictive analytics for price forecasts and real-time analysis of large volumes of data. AI-based tools recognize price patterns and support data-driven decisions in procurement.
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