Pricing Strategy for Building Materials
Pricing Strategy for the Building Materials industry
Building Materials Pricing Strategy
The building materials industry is often characterised by the words ‘commodity’, ‘cost plus’ and ‘contracting margins’.
Building Materials:
Industry Insight
Sales teams are increasingly expected to do more with less, often resulting in unintended margin erosion.
With the rise in housing and civil construction demand, a major building boom is underway in the Australian market.
Many companies have been able to retain margin percentages and, in some cases, grow margins. However, many other companies have sold more volume at the same margin or slightly lower margins driven by price discounting or increased rebates. It has been a case of profitless prosperity. The opportunity to generate earnings growth has yet to be realised.
The building materials industry is witnessing a significant shift in how materials are purchased. The increasing influence of professional procurement executives is disrupting traditional, relationship-based selling, which has historically safeguarded revenue and margins.
Building materials companies have extensive product ranges and customer bases due to a spate of M&A activity in the sector over the last 20 years.
Some segments have been protected from imports, while others have experienced substantial price pressures due to excess inventory and transfer pricing strategies. These strategies are frequently undertaken by global players who are prepared to sell into Australia at cost, or just above, and repatriate profits into more favourable tax systems.
There is a growing demand for sales teams to sell and deliver more value to their customers, reflecting the industry’s evolving dynamics.
With the increasing complexity of supply chains, changing customer expectations, and more determined competitors, less-than-ideal results occur due to rushed decision-making, limited information, or a lack of technique and process. However, amid this pressure and chaos, there are margin expansion opportunities.
Expertise
Our experience in the building materials industry includes working with companies that manufacture aluminium extrusions, cement, fasteners, fit-out components, flooring, structural timber, and steel products.
Pricing Insight can help your business:
- Define and develop customer value drivers
- Design a pricing strategy aligned to your business model
- Redevelop trade agreements to capture more value
- Create management alignment to the right pricing strategy
- Design and educate effective pricing teams
- Develop more effective industrial marketing programs and negotiation methods
- Employ advanced analytics and modelling to identify margin opportunities
- Help you implement new systems and tools to manage pricing or aligning to SAP / Oracle platforms etc
- Develop a new List Price, Discount and Rebate pricing architecture
