An effective pricing strategy is critical for success in the manufacturing industry. Engaging a pricing strategy expert can help you navigate complex challenges, such as margin erosion risks, and drive significant earnings growth through strategic margin expansion.
Do you need external advice to develop an effective pricing strategy? Not always.
Sometimes, it may be better to develop consensus and a solution internally to drive the required cultural change within an organisation. It is also essential to define the problem first.
Many pricing challenges turn out to be business model problems. Blockbuster Video may have thought an aggressive or optimised price discount could save it from the unlimited, all-you-can-eat online video store that is Netflix. The issue is that Blockbuster faced a business model problem of which weak pricing power was a symptom. The same can be said for many services and products substituted over the last 25 years. Pricing advice could help ease the pain or reduce the “inflammation” but will not fix the underlying problem.
There are times, however, when an external 3rd party may provide objectivity that cannot be achieved when you are in the eye of the storm.
It has often been said that no one can simultaneously be the observer, the observed and the observation. An external 3rd party provides perspective and impartiality that cannot be achieved internally. In the sporting world, we readily accept the role of the coach and the psychologist to give an edge or advantage to the elite athlete or champion team.
Here are eight scenarios where expert advice can help accelerate revenue, pricing and margin gains and drive earnings growth, supported by specific case examples relevant to the B2B industrial and building materials markets.
1. You Face a Complex or Difficult Set of Circumstances with No Obvious Solution
Case Example: XYZ Industrial Adhesives, a leading manufacturer, grappled with raw material price fluctuations due to geopolitical tensions. Their cost-plus pricing model no longer covered rising costs, and competitors were aggressively cutting prices. Despite internal efforts, the team needed help to agree on a way forward. Pricing Insight developed a dynamic pricing strategy that increased gross margins by 2%, ensuring improved profitability and market share retention.
2. There is Management Misalignment on the Best Way Forward
Case Example: ABC Building Materials faces internal conflict. The CFO advocated for a value-based pricing model to improve margins, while the COO preferred cost-plus to avoid sales disruptions. This disagreement causes strategic paralysis. Pricing Insight facilitated alignment, resulting in a 7% improvement in gross margins and a unified executive team committed to a data-driven pricing strategy.
3. Lack of Knowledge or Techniques to Make the Right Decisions
Case Example: TechSensors Inc., a company specialising in high-precision industrial sensors, sets prices based on intuition rather than market data. Sales were stagnating, and competitors were gaining ground. Pricing Insight introduced advanced market analysis techniques, such as value analysis, leading to optimal pricing decisions that boosted gross margins by 3% and significantly improved market positioning.
4. Lack of Knowledge or Resources to Implement a New Approach
Case Example: BuildEquip, a construction machinery manufacturer, transitioned to a subscription-based pricing model to increase recurring revenue but needed more implementation expertise. Pricing Insight guided them through developing pricing tiers and educating the sales team. The result was a 10% increase in EBIT within the first year of implementing the new model.
5. Lack of Resources and Bandwidth to Drive a Project
Case Example: Industrial Supply Co. wanted to introduce a tiered pricing model to better serve its diverse customer base but needed to be more robust with ongoing projects. Pricing Insight developed resources and expertise to implement a new price architecture, resulting in a 5% increase in gross margins.
8. You Want to Galvanise and Unite a Team to Engage and Support a Course of Action
Case Example: SolidBuild Materials was launching a new premium product line but faced resistance from the sales team, who were comfortable with existing products and pricing structures. A Pricing Insight conducted workshops and training sessions, addressing concerns and building a motivated team to champion the new product line. This alignment led to a 9% increase in gross margins for the latest product line.
7. Uncertainty and Substantial Economic and Company Culture Risk in Changing Current Practices
Case Example: PrecisionMach, a manufacturer of high-end industrial machinery, considered moving away from traditional discounting practices to improve margins. This shift faced internal and external resistance. Pricing Insight developed a new discount model supported by an in-depth price optimisation program across the entire product portfolio. Pricing Insight also assisted in change management through consultative workshops to manage stakeholder expectations. As a result, PrecisionMach saw a 4% increase in gross margins and a 20% increase in earnings growth.
8. You Need Results to Occur Within a Short Time Frame
Case Example: InnovateTech, a developer of industrial automation software, needed to rapidly adjust its pricing strategy in response to a new low-cost competitor. The internal team needed more bandwidth for a quick turnaround. Pricing Insight quickly analysed the competitive landscape, developed a value-based pricing power model to inform decision-making, and implemented a new pricing strategy and tactics program within 12 weeks, resulting in a 15% increase in EBIT within six months.
Engaging a pricing strategy expert can drive substantial financial benefits, such as increased gross margins and EBIT gains. However, when implemented correctly, the right pricing strategy can also deliver lasting and sustainable change to create a culture of commitment vs compliance.
By addressing these scenarios with expert guidance, your company can enhance its pricing strategies, boost profitability, and maintain a competitive edge in the market.
If you want to identify whether external advice from a pricing expert can help, the best place to start is to develop a one-page written brief. Key bullet points covering the following will accelerate your communication and understanding of the required actions and outcomes when seeking to engage a pricing expert.
- What is the primary question, problem or opportunity you need to explore or evaluate?
- What is the ideal or target outcome[s] desired?
- What are the caveats or constraints that must be considered?
- Who are the sponsors, champions and supporters of this initiative?
Pricing Insight can help you identify revenue and margin opportunities and the right pricing strategy. Book a discovery call to discuss how our expert guidance can help your business navigate complex pricing challenges and achieve sustainable earnings growth.
