Striking the right balance between effective pricing strategies and company performance is often an issue because there are so many factors involved. With price being the most important lever impacting your bottom line, one major pricing mistake could risk your company’s profit potential.
Several years ago, an Ohio-based specialty metal business made the decision not to charge for freight costs, even though their products were extremely heavy. The rationale? None of their competitors were charging, so they couldn’t either.
Achieving significant pricing gains can feel like a long, hard-fought battle. This makes it all the more satisfying when the numbers start to roll in, validating your efforts and proving without a doubt that profitability is attainable.
The thought of losing those gains may keep you up at night. What safeguards can you put in place to protect the gains you’ve achieved and prevent your company from sliding back into past poor pricing habits?
It all starts with building a confident sales force.
Whether it’s from pricing, freight, rebates, or payment terms, price leaks can have a detrimental effect on your company’s profitability. In the infographic below, we’ve outlined the 50 most common price leaks across multiple business areas.
We interviewed pricing expert Keith Hohman about the four most common price leaks facing B2B companies today. Watch as he explains the underlying causes behind—and ways to fix—price leaks like freight costs, payment terms, expedited delivery, and rebates.
One of the questions we’re asked most frequently at INSIGHT2PROFIT is “How do I structure my pricing team?” The quick answer is that it depends. Small companies may only need a single person focused on pricing, whereas larger businesses may need a team. Regardless of size, it’s important that someone at your company has clear responsibility and accountability for managing pricing.
When you sell a portfolio of products to a broad base of customers, on any given day there’s a mix of which customers are buying what products. Because each product and customer has a different profit margin, this mix will impact your overall profitability. Even if you have identical revenues in June and July, if your product or customer mix is different one month, your margins will be different, too.
Whether you’re a manufacturer, distributor, or service provider, you likely face some form of capacity constraint.
For manufacturers, it might be machinery throughput. For distributors, it might be truck capacity; for service providers, staffing.
It’s critical that you understand how these constraints impact your profitability.
Typically, businesses focus on optimizing cost structures to maximize margin per unit. But we repeatedly find that margin per constraint is a more accurate profitability metric. We call this capacity utilization, and optimizing capacity utilization should drive your overall pricing strategy.
How good are your BI tools at explaining your data?
A BI tool might report you lost half a point of margin last month or gained two points in revenue, but what’s driving those changes often remains a mystery.
If you’re ready to unleash the power of your data, a pricing business application like Profit Builder can be the solution you need.
Check out the video below to learn more about how Profit Builder works:
When there’s a pricing problem at your company, you know it. Still, you struggle to pinpoint what, exactly, the problem is—and how to fix it.
One critical step towards gaining visibility into your pricing issues is something we like to call “price-down reporting.” In this article, we’ll talk about what that term means, and how to use it to your advantage.