Building a well-reasoned price management methodology to achieve greater profitability
When it comes to pricing, do you have the right team, armed with the best tools, applying the best pricing strategies? Are you utilizing price management software optimized for manufacturers? Are you price planning or merely price setting? A study by the non-profit group ITAC (part of the Manufacturing Extension Partnership) found that nearly 40% of the IndustryWeek 500 companies do not have dedicated pricing titles or roles within their ranks. That adds up to a lot of lost revenue from immature or underdeveloped pricing strategies.
Here are 5 killer tips to take your price management from zero to hero:
- Nurture a pricing strategy team from the beginning
How are you making your price decisions? Is it more of a “gut-feel” approach or is it based on reliable analysis? The most successful manufacturers have a dedicated team looking at the right trends, keeping up with renewals, and applying oversight to the entire product catalog rather than just a subset.
- Examine pricing scenarios with established pricing teams versus no team (or an ad hoc team)
Team vs no team? A price management team is organized and tasked with considering all the elements that should factor into your price setting. But, if the economic conditions impacting your target markets change, only a formalized (i.e., non-siloed) pricing team can pivot and respond nimbly.
- Ensure through pricing strategy that your numbers are adding up
A good pricing strategy with proper business process support allows you to choose the margin based on your organization’s appetite for each order, and then to balance margin and volume to optimize the order book, the factory, and the financial ledger.
- Remember: contract expiration dates and bid cycles impact price management
Whose job is it to stay on top of contract renewals and quickly respond to waves of RFPs and bids? Price management via spreadsheet (as opposed to a powerful data analytics tool), leads to a win-at-all-costs approach to each individual opportunity, but often a loss in overall profitability.
- Identify the critical role of software
The right technology is crucial for making sure that your organization is not missing out on growth opportunities. Business process automation and software tools move you to a digital enterprise, and price setting is an ideal process to automate and manage effectively with effective price management software for manufacturers.
So, what’s your approach to price management? Do you know how to scale up your capabilities and ensure that you have a repeatable, informed pricing analysis process in place? If not, download this eBook, 5 tips for killer price management: how manufacturers move from quick fixes to profits that stick.