Todd Babbitz tends to start with a number. A 1% improvement in price. Four hundred thousand students. Then he gets to what that number could mean for the people responsible for it.
An advisor to ProfitOptics and founder of Revalor Growth Partners, Todd has worked as a McKinsey pricing expert, a C-level executive, and an antitrust attorney. He has led more than 50 pricing transformations. He also spent five years at Chicago Public Schools, drawn by the opportunity to make a difference for an entire district.
Todd brings that perspective to ProfitOptics’ pricing advisory services, which clients can engage independently or alongside a software build. We talked about why pricing starts with leadership, what sales teams can miss about their customers, and why public service fits his career better than it might first appear.
Two things. One is pricing and revenue growth. Even my legal career was about pricing. I specialized in antitrust and competition law: defending price-fixing litigation, clearing mergers, and helping clients structure partnerships. The questions often focused on how companies compete and what happens to prices.
That continued through consulting at Aon Hewitt and McKinsey, and now at my own firm. The other connection is impact. I’ve been drawn to roles where I could help produce meaningful outcomes at scale.
Chicago Public Schools was serving about 400,000 children at the time. Think about that as a population. That would have made it the second-largest city in Illinois. The opportunity to help improve outcomes for that many students was enormously motivating.
I’m passionate about education, but what drew me to the job was the scale of the impact and being in a role where I could help make it happen. I spent five years there.
I left my employment. I didn’t really leave the school system. I have two children in public schools, and I serve on the board of a high school in Chicago. I’m still very much attached to it.
How much a small improvement can matter. Depending on the company’s economics, a 1% improvement in realized price can mean roughly an 8% improvement in profit. That’s illustrative, with volume and costs held constant; the actual impact depends on the business. But even a minor pricing improvement can make the difference.
Then think about a private equity–owned company that may be sold at a multiple of earnings in a few years. Those improvements can substantially affect the value of the business. People understand that pricing matters. They don’t always appreciate how much.
"People understand that pricing matters. They don’t always appreciate how much."
They’re concerned about losing volume. That’s understandable. But the amount of volume they would have to lose to offset a moderate price increase is often much higher than they think. You have to run the numbers for that business.
The same applies in reverse. If you cut prices, how much additional volume do you need just to keep profit flat? Unless you’re in a highly commoditized business, a modest price reduction may not produce anything like the volume increase you need.
Yes. Providing the numbers and walking through them is often necessary and helpful. It isn’t always intuitive.
But there’s another issue. A company may have a strategy to grow market share, expand a product line, or improve profitability. Then you get down to pricing and find that it’s still, “We know our cost, and we mark it up 30%.” There’s a disconnect between the strategy and the decisions being made.
What is it designed to achieve? Is that price intended to drive volume, revenue, or profit? Are there customer segments you’re trying to reach? Should the price be different for them?
You can’t answer those questions just by knowing your cost. I start with clarity about the company’s objectives, then work through how pricing supports them.
"You can’t answer those questions just by knowing your cost. I start with clarity about the company’s objectives, then work through how pricing supports them."
Sometimes they don’t. I’ll ask whether they want to push harder on volume or profitability, and they’ll say, “Both.”
We can work toward both. But that may require more than pricing. It may involve sales force effectiveness or other changes in how the business goes to market. That’s a conversation about what's actually necessary to achieve the goal.
Some people think of pricing consulting as setting a price or putting in a tool to measure results. For me, it starts with the strategy. What outcomes are you seeking, and over what time horizon?
That’s something we hear often. People assume they lost a sale because of price. But when you talk to customers, price may be the sixth or ninth most important factor. Relationships, service quality, and delivery can matter much more.
If you’re selling a component that represents a small part of the customer’s total cost, getting it there on time and with the right quality may matter far more than a 10% price difference.
"When you talk to customers, price may be the sixth or ninth most important factor. Relationships, service quality, and delivery can matter much more."
Exactly. Without talking to customers and getting an objective view of how they make decisions, you can get your priorities wrong. You may get more from investing in relationships and service quality than from dropping your price.
As a thought partner to the team and its clients. I can contribute in several ways: clarifying what a client is trying to achieve, understanding what customers value and are willing to pay for, and helping shape what the software needs to do.
I can also help during an engagement by working through what’s getting in the way of better performance. The right contribution depends on the situation. I’m focused on where I can help drive outcomes.
Clarity about what you’re trying to accomplish. A client may need more than a software implementation. Understanding the objective and what’s necessary to deliver it broadens the conversation. It helps determine what the technology needs to support.
The opportunity to have an impact. That was true at Chicago Public Schools, and it’s true with clients. If I can help drive better outcomes for ProfitOptics and the companies it serves, I’m happy to play a role. I believe good things follow from staying dedicated to client service.
ProfitOptics helps distributors and manufacturers improve pricing, rebates, and quoting through commercial advisory, custom software, and connected data. Clients can engage ProfitOptics for standalone pricing strategy and advisory services, a technology build, or both. The work starts with the business objective and brings together the expertise and capabilities needed to achieve it.
Connect with Todd Babbitz on LinkedIn.
Who is Todd Babbitz, and what is his role at ProfitOptics?
Todd Babbitz is an advisor to ProfitOptics and founder and senior partner of Revalor Growth Partners. He brings 30 years of experience in pricing, revenue growth, and transformation, including roles at McKinsey & Company, INSIGHT2PROFIT, Aon Hewitt, and Chicago Public Schools. He contributes a strategic perspective on pricing and commercial performance.
Can companies engage ProfitOptics for pricing advisory without buying software?
Yes. ProfitOptics offers standalone pricing strategy and advisory services. Companies can engage the firm for advisory work, a custom software build, or both, depending on their business objectives.
What does pricing advisory help a business do?
Pricing advisory helps a business connect its growth and profitability goals to pricing decisions. That can include aligning leadership on objectives, evaluating price and volume trade-offs, understanding customer buying factors and willingness to pay, and identifying changes needed to improve commercial performance.
How does pricing advisory relate to pricing software?
Pricing advisory establishes the objectives and decisions the business needs to support. Pricing software helps put those decisions into practice. ProfitOptics can provide advisory services independently or combine them with data work and custom software built around the company’s requirements.