The exploding number of brands, channels, and distinct customer segments means that many companies must now juggle hundreds of thousands—in some cases, millions—of price points while seeking to maintain consistent pricing strategies and communications across an ever-increasing number of products and outlets. For a broad variety of manufacturers that sell to consumers and businesses alike, this proliferation has made pricing more difficult but the rewards for managing it well much greater.

The proliferation of channels and the microsegmentation of customers have driven the typical consumer packaged goods (CPG) company to create new brands and stock-keeping units (SKUs) as it attempts to limit channel conflict, address unmet needs, and reach for underserved consumption occasions. In extreme cases, some CPG manufacturers with a number of brands and SKUs—selling through various channels at both regular and promotional prices across different geographies—have tried to manage as many as 20 million individual price points each year. In food service, where prices might move on a daily or weekly basis, each transaction may carry a unique price point, elevating the number of pricing decisions to more than 100 million. And sheer transaction volumes aren't the only issue. The introduction of new discount, rebate, and trade allowance categories, combined with customer-specific trade terms negotiated by powerful retailers, has driven down the number of "standard" transactions, further complicating price management.

The environment of business-to-business companies is no less thorny. A leading manufacturer of lighting equipment, for example, manages more than 450,000 SKUs across ten major brands as it tries to meet local market preferences and remain nimble in the face of increasing domestic and overseas competition. Direct-sales representatives, key-account-management teams, and third-party agents sell these products to contractors, local distributors, distribution chains, consortia of small distributors and retailers, and, not least, large home center chains. With more than three million pricing opportunities annually, the challenge of making the right pricing decision every time is enormous.

Get the full story at The McKinsey Quarterly