For manufacturers, revenue generation means earning the highest possible margins while running a sustainable business (i.e., maintaining minimum production volumes and a satisfactory customer retention rate, plus achieving your new customer target goals). Pricing clearly plays a role in this.
But one factor can make a key difference between meeting and exceeding your revenue and profit goals—setting the RIGHT price. The art of setting the right price involves a lot more science today than in years past. Analyzing potential product prices and their impact on margins, volumes, and customer reactions can use modeling tools with predictive analytics and machine learning to help price analysts hit much closer to the mark than experience and intuition alone. Using an objective and strategic process that involves deep analyses empowers your team with a new level of insights into existing conditions and ultimately, improves their ability to respond to changes in customer behaviors and market dynamics.
Developing a strong pricing practice involves skill, dedication, and tools. Do you have what it takes? The non-profit group ITAC, which is part of the Manufacturing Extension Partnership, conducted a study that found just 61% of the IndustryWeek 500 companies have dedicated pricing titles or roles within their ranks. That means nearly 40% of these industrial enterprises, which represent more than $5 trillion in sales revenues, are passing off pricing responsibilities to staff who were hired to serve in other capacities and may lack the skills—or simply the bandwidth—to succeed at pricing. Without training or time, this can translate to lost revenue because of immature or undeveloped pricing strategies.
Skilling up—and scaling up
For price planning to work best, your pricing staff needs skills in analyzing pricing, customer behaviors, market trends, competitive intelligence, and a solid understanding of your business operations, including inventory, manufacturing capacity, and overall demand. To bring all this capability together, companies may need a team that can pivot quickly and readjust pricing when economic conditions change. (https://iheartrving.com/) An ad hoc or sales-oriented pricing team only sees part of the picture and generally can’t respond as nimbly.
A dedicated team will also have a comprehensive business process to coordinate information and ensure adequate responses to changing business conditions. The ad hoc or siloed team won’t be agile enough—or will assume it’s someone else’s responsibility—leaving you with little ability to evaluate price models and identify the optimal plan for the conditions at hand.
And while one team can bring all the necessary facts to the table and has the skills needed to evaluate optimal pricing, one team cannot manage your full catalog of products in a timely fashion—or even a significant portion of your products. Finding talent with the analytical skills to detect patterns and trends, model customer behavior, determine pricing power and elasticity, and so on, is not only difficult due to their scarcity, but also costly.
Pricing management technology is transformational
To enable your team to cover more ground more quickly, your business is going to need analytical tools to assist in the discovery of behaviors and trends as well as recommend price changes where they can have the most effect on profitability. An automated price management solution is crucial for making sure that your manufacturing organization is not missing out on growth opportunities. It also streamlines your ability to protect sales margins, both with upstream commodity pricing and downstream bidding and price management. Business process automation and software tools can transform your organization into a digital enterprise, and price setting is an ideal process to automate.
Vistex solutions effectively manage complex pricing challenges with ease and reliability, by identifying data patterns and enabling your price management team to get those updated results for the next bid you must approve or submit.
In the end, the right team, armed with the right tools, applying the best strategies, adds up to better margins and more profit for your business.