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.
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.
Pricing data can be dense. If no one is reviewing it, managing it, comparing it or scrutinizing it, it’s likely your organization is missing price leaks you could otherwise put a stop to. From volume discounts to price overrides, profits are lost and margins are cut, but do you know by how much? Can you identify your true pocket price for your top selling products?
If not, you may have a data visualization problem. But like any problem, a solution exists, you just have to seek it out. Here are four ways to gain better visualization into your organization’s pricing data.
On December 11, 2014, I hosted a webinar with Manufacturing.net. The webinar, “How Manufacturers Can Raise Prices Without Risking Volume: A 4-Step Process to Drive 20% Profit Gains,” focused on how manufacturers can employ strategic pricing to grow their profitability using our four recommended steps. There were a number of excellent questions asked during the Q&A section, and they’re included below, along with my original answers.
At INSIGHT2PROFIT, we work with leading manufacturers to improve pricing strategies. And over the years, we have honed our process, which combines technology with strategy, and developed four steps that lead to improved bottom lines. The four-step process has helped manufacturers see 20 percent more profit, typically within months.
Now we are sharing our approach with you in our upcoming webinar How Manufacturers Can Raise Prices without Risking Volume: A 4-Step Process to Drive 20% Profit Gains December 11 at 2 p.m. ET, 11 a.m. PT.