PRICING: A MISUNDERSTOOD CONCEPT IN MANY INDUSTRIAL COMPANIES (B2B)
Some mistakes in pricing management commonly made by industrial companies are:
1. Prices easily manipulated according to the pressures of short-term business goals.
2. Use of volume discounts in order to reach the monthly quotas.
3. Price manipulations to "fill the plan" with workload.
4. Cost-plus based pricing.
5. To consider pricing management as "pricing corrections" on the basis of historic data.
The following graph shows the risk of the compulsive "discount” effect, commonly seen in volume oriented companies.
Low costs allow for low prices; an increase in costs generates pressure on the price to be “delivered" to the market. This problem can become a major headache if costs are not finely calculated, or if they are not calculated in time. Strategically, a bad pricing strategy can 'disarm' a correct segmentation programme.
Furthermore, it should be considered that the competition will probably choose the same line of productive improvement.
FOUNDATIONS FOR A CORRECT MANAGEMENT OF INDUSTRIAL PRICES
Progressive companies are those that calculate and document the benefits obtained by the customer with their product while in use. The better your offer to the customer, the easier you can assign a differential price to the much popularized costs + x% method.
The key is:
1. Documenting numerically ($) the benefit that the client gets from your offer.
2. To share the "benefit” valorization between the supplier and the client company.