The average price for management consulting services has been rising at an estimated annualized 1.2% in the three years to 2017, harming buyer power. Suppliers are less likely to negotiate based on price due to rising prices market-wide. However, very little volatility has been occurring in the price of management consulting services during the period, helping buyers accurately forecast prices and time purchases.
Pricing in the market has moved closely with the economic cycle. Declining corporate profit has been diminishing demand for some of the services associated with management consulting. However, demand for management consulting as a whole has still been growing in the three years to 2017. This is because businesses typically hire vendors to help with downsizing, mergers and general streamlining activity to cut costs and boost profitability when corporate profit is lower. Moreover, declining corporate profit has primarily impacted select sectors in the economy, while many others remain highly profitable.
Increases in government investment and a rising number of businesses have also been spurring demand growth. The rising number of businesses has been expanding the customer base for services, while growing government expenditure has been allowing public sector buyers the financial flexibility to purchase more services to improve their operations. In addition to rising demand, overhead costs have been growing during the three years to 2017. As suppliers encounter higher costs, they are more inclined to pass them on to buyers in the form of higher service prices.
Still, low market share concentration and a sizeable number of suppliers have been helping to moderate price growth during the period. In addition, average wages have remained fairly steady, benefiting buyers by mitigating the rate of price growth. Competition among suppliers brought on by low market share concentration has also kept price growth modest, contributing to low price volatility. However, because prices are forecast to rise further, buyers should consider contracting services now to avoid paying more in the future.
In the three years to 2020, demand for management consulting services is expected to rise further at an annualized rate of 1.7% due to demand growth brought on by economic improvement in the business environment and the public sector. However, price volatility will remain low, benefiting buyers.
Corporate profit and the number of businesses are expected to grow consistently in the next three years as a result of more favorable economic conditions, rising oil prices and greater consumer spending. This growth will provide more potential clients for management consulting providers and increase business clients’ ability to invest in these services. These factors will lead to higher demand for market services and, therefore, higher prices. In addition, total government spending is expected to increase at a faster rate during the next three years, bolstering demand from the public sector demand. As demand increases across the market’s major buyers, prices will rise and thereby diminish buyer power.
Despite rising prices, price volatility will remain low in the next three years. Suppliers’ primary cost is the wages of their consultants, and average wages are expected to grow negligibly in the three years to 2020 with low volatility. As a result, suppliers will be able to easily anticipate their costs, helping them to remain financially stable on average and provide buyers with steady prices. The expected price increases will be moderate during the period, so buyers without a current need for services or those forced to delay the purchasing process will not have to worry about the service suddenly becoming unaffordable. Still, buyers that anticipate an upcoming need for management consulting should consider contracting services now, prior to future price increases.