Pricing
Email this postPricing is a very complex topic. There are issues at three levels:
Client Case Example
Industrial Packaging Company
This client had limited information on actual price realization, taking into account cost to serve and working capital, and lacked the sales force skills to sell on value rather than price. We developed a pocket margin database, trained sales reps and management in its use, and supported key customer negotiations. Our work helped drive $2.8 million in incremental margin from one of their largest accounts and enabled the client to better align pricing and value provided across the entire customer base.
1. Pricing strategy
- Clear understanding of buyer values by customer segment (particularly the value/price trade-off)
- Awareness of positioning relative to buyers’ alternatives
- Analysis and awareness of profitability and margin drivers. Well-defined pricing strategy by product line, customer segment, and channel—how to monetize the knowledge and assets of the company
2. Price setting and processes
- Single point of accountability for pricing within a business unit (e.g., a pricing czar)—collecting competitive pricing information, setting standard pricing, monitoring price realization, etc.
- Clear definition of processes for pricing approvals and handling exceptions—including well-defined roles and responsibilities
- Management visibility into price realization
3. Execution and monitoring
- Effective training on key selling skills related to pricing—value based selling, dealing with customer push back, negotiating elements of price/volume/payment terms/delivery speed/etc.
- Powerful data and tools delivered to the line sales organization
- Well-designed incentives (cash and non-cash) that motivate the desired behaviors by the sales force
- Ongoing capability for monitoring market prices
Pricing effectively can have a significant impact on revenue performance and margins. And, the most important issues in pricing can vary significantly by industry. For instance, product companies have unique issues around cost-to-serve/pocket margin while software companies must consider licensing structures, implementation assistance and maintenance. We understand these issues, their impact on pricing and the options for analyzing each company’s unique situation. We can help improve pricing performance through a broad range of advisory and implementation services.
If you believe your company can benefit from our help in facing pricing pressures in your market, please contact us to tap into our experience and expertise.