Nonprofits, governments, small businesses and multinationals have taken the ax to costs in an effort to weather the economic storm, sometimes fighting for their very survival.

Is this really the most effective place to focus management's strategic efforts?

Is manipulating costs the best lever we, in our roles as CPAs and managers, can pull? The second edition of "The Price Advantage," by Walter L. Baker, Michael V. Marn and Craig C. Zawada, argues that it is not.

The first thing I noticed about "The Price Advantage" was the suggested price of $80. At 384 pages, this is two to three times the price of most business books. Thankfully, this is truly a case of "you get what you pay for," and I recommend this book to anyone who works directly with pricing activities or has clients who do.

Among the many lessons in the book, the strongest one is probably the base argument that price is not untouchable. After all, many of us have the impression that price "just happens" as a result of supply and demand, and from the infl uence of customers, competitors, barriers to entry and substitute products. We think of price as the end rather than the means. This book, as evidenced by its title, makes the case that nothing could be further from the truth.

In the first chapter, I found my thoughts about price management challenged in a section titled "The Power of 1 Percent." This is the idea that a 1 percent change in price has a far greater impact on profitability than a 1 percent change in cost. The authors share a straightforward model consisting of aggregate information based on the Global 1200. In this group of 1,200 companies from a variety of industries located around the world, fixed costs represent, on average, 20.5 percent of price, variable costs represent 68 percent of price and return on sales (operating profit) equals 11.5 percent.

Using these components, a 1 percent decrease in fixed costs (from 20.5 percent to 20.3 percent) increases profit by 1.8 percent. Similarly, a 1 percent decrease in variable costs results in a 5.9 percent improvement in operating profit. But a one percent increase in price (from 11.5 percent to 12.5 percent) results in an 8.7 percent increase in operating profit. The lesson here is that very small movements in price can have large impacts on profits.

There are issues to address when manipulating price to keep volume from dropping when price is increased, but the examples in the book show why and how that is possible. The book also explores the dangers of handling pricing responsibility poorly, including the damaging nature of price wars and the impacts of not being conscious of competitor positioning when introducing or improving products.

The authors lead the pricing practice for McKinsey & Company, an international management consulting firm. They bring more than 60 years of combined experience and numerous examples drawn from their experience. The real-life nature of the scenarios is much stronger than hypothetical situations and theories that I've read elsewhere. Credibility is strong, and the examples are easy to follow throughout.

The perception that accountants are cost-focused is longstanding and robust. Even today, the term "cost accountant" is frequently used to describe those in roles that encompass far more than what that title suggests. It is time for those in the profession to move beyond that perception. Focusing on strategy implementation and execution, including a focus on pricing excellence, is a step in that direction -- Reading "The Price Advantage" is a great way to start that journey.

Other pricing books to consider

"Smart Pricing: How Google, Priceline and Leading Businesses Use Pricing Innovation for Profitability," by Jagmohan Raju and Z. John Zhang

Less technical and an easier read than "The Price Advantage," but covers some of the same ground. It is entertaining with facts presented as part of the story. The focus revolves around recent cases involving companies that most people have dealt with or at least heard of before.

"Priceless: The Myth of Fair Value (and How to Take Advantage of It)," by William Poundstone

This book focuses more on the consumer point of view and on the behaviors/reactions infl uenced and caused by pricing decisions. After reading this book, you will not look at menus, shelf stickers, travel websites, and many others, the same way.

"Cheap: The High Cost of Discount Culture," by Ellen Ruppel Shell

Given its title, this book doesn't hide the fact that it has an agenda. Using much of the same research that is presented in "Priceless," this book's goal is to persuade the reader that the cheapest option is not necessarily the best option.

Brenden Schaaf has worked in various accounting roles at ADM-Benson Quinn, a division of Archer Daniels Midland Company, for the past 15 years. He also teaches management accounting at Metropolitan State University as a member of the community faculty. Schaaf is an MNCPA member and serves on the Footnote Advisory Group. He can be reached at bschaaf@bschaaf.com or follow him on Twitter at bschaaf.