As a manufacturer, your company is up against several obstacles to revenue growth in the year ahead, including shifting material costs, an ongoing shortage of skilled personnel, and instability in global supply chains. Notwithstanding, where pricing is concerned, we’d like to offer up a few strategies for boosting revenue in discrete manufacturing to help navigate these uncertain times competitively.
At Pricefx, as a proud leader in enterprise pricing software, our solutions are above all a vehicle for growing profits through pricing automation, data-driven decision-making, and visibility into performance – and manufacturing is among the major industries we help with that.
In this article, we’ll guide you through a few key strategies that manufacturing companies, like yours, can bring to its pricing to hit revenue targets and even capture new opportunities.
So, let’s dive in!
Six Strategies to Boost Revenue for Discrete Manufacturers
1. Quickly and Consistently Implement Manufacturing Pricing Strategies
Price can be a powerful tool in capturing higher revenue from your customer base, as it effectively communicates and reinforces the perceived value of your products. That is, provided your company can set the right prices consistently and reliably.
At this moment, you may calculate your price lists according to your pricing strategies manually, and that process likely takes the form of running the numbers in Excel spreadsheets while cobbling together data sets.
A manual approach affords little consistency in your pricing strategies by leaving room for error, prompting the broader question, what’s the point of having a pricing strategy, which, after all, is meant to make my company more money, if we can’t deploy it consistently?
What’s more, even if your company has a process in place that enables consistent pricing, if the data is obscured, difficult to understand, or inapplicable to the market reality, this lack of transparency or relevance slows down adoption, as that process has proved unreliable in the long term.
To ensure your products are priced competitively in the market, and, in turn, boost revenue through optimized margins, your manufacturing company should have a central “control room” to deploy its pricing strategies – one which allows strategists to define pricing guardrails and automatically trigger prices according to those conditions.
By setting up your strategy’s calculation logic to maintain its pricing across customers, products, and geographies in a single algorithm, your company can evade the variability of manual calculations, and recoup revenue opportunities that would have otherwise been lost.
And, beyond ensuring that your company consistently upholds its current pricing strategies, it should take advantage of analysis tools, like price simulations, to optimize future strategies in response to shifting market conditions and industry trends.
2. Align Pricing Guardrails Across Regions
As a manufacturing enterprise with a large global presence, your company should be pricing its products appropriately to consider regional specifics; not only to capture varying levels of willingness to pay and other factors, but also to protect itself from grey market exposure.
With considerable variability in how markets and customer segments perceive the value of your products and services, and, consequently, their willingness to pay, aligning your company’s value proposition of its products with the price expectations of each segment is critical, as it mitigates the need for discounting and other strategies that create a false baseline of value.
Product pricing in wealthier countries should reflect higher average purchasing power and, conversely, ensure affordability in less affluent markets. However, this relationship is difficult to capture in pricing when your company lacks a comprehensive view of its pricing guardrails across markets and a way to enforce them. As a result, this lack of consistency invites distributors and international corporations to sell your goods at lower-than-market rates, and when that happens, it’s your bottom line that’s compromised.
Mitigate grey market risk and capture the revenue you expect in each market by defining the lowest and highest prices your company is willing to sell its products, both at the global and local level. This way, acceptable prices will fall within these parameters, and if not, automatically require approval.
To track how well local price lists honor these established local and global price corridors, your company can take advantage of performance dashboards to easily pinpoint where to intervene, in effect optimizing its revenue potential in each market.
3. Make Smarter Decisions When Quoting
Your company’s quoting process is also a key ingredient in boosting revenue potential, seeing as the quoted price is often the last deciding factor before moving forward with an agreement.
Consistently error-ridden and delayed quotes due to inefficient processes can erode trust in long-term relationships with distribution or retail customers, as well as compromise future opportunities by sending the wrong message (you’re just not that important to us!).
Without data-driven tools, not only are your sales executives spending most of their time on manual quote generation, rather than strategic opportunities, they’re also quoting in the dark, having little to no price guidance to support their decision-making.
Armed with a centralized quoting solution with built-in pricing guidance and analytics to determine an optimal price and product mix for each case, your sales teams can close deals quickly and increase win rates, avoid underpricing, and conserve their energy for pursuing higher-value .
Ultimately, the quoting tool you go with should empower your teams to create more informed quotes. And by this, we mean quoting to capture the most value, rather than to merely reflect the lowest acceptable price.
4. Don’t Sacrifice Long-Term Value for Short-Term Deals
In negotiations with distributors and retailers, pricing products with the sole aim of closing deals (without understanding how those prices affect profitability) is another way salespeople in manufacturing can unwittingly leave money on the table.
To support healthier margins, sales teams should offer prices in negotiations that not only reflect each deal’s unique customer and product combination, but also comply with the company’s pricing strategies, including its floor and ceiling pricing thresholds.
To do this successfully, price calculations will need to consider several factors, including historical prices for similar customers and products, as well as competitive pricing in the market.
Instead of attempting this with disparate manual tools and data sets, salespeople would benefit from a data-driven price optimization engine that runs the numbers by itself, pulling from third-party and historical pricing data to suggest prices in line with the market and perceived customer value.
By leveraging optimization tools to quickly pinpoint the amount a customer is willing to pay for the value, sales teams can close deals more quickly and capture more value in each transaction, ultimately supporting revenue growth in the long term. Also, keep in mind that not all price optimization engines are created equally; make sure that the PO engine you choose is one that your team can easily interpret and defend – with or without a data science degree.
5. Get Ultra-Targeted In Customer Discounts & Surcharges
Approaching discounts and surcharges in the same way, irrespective of variability in customers, regions, and sales channels, can be harmful to your manufacturing company’s bottom line in a few important ways.
Different customer segments require discounting types and strategies tailored to their unique needs, and faltering here could lead to missed sales opportunities. And, beyond setting up the right discount, incentives should be treated dynamically, continually adjusted (for example, gradually reduced in a multi-year contract) to maximize, not give away, profits over time.
Similarly, your operating regions each come with its own unique production environment and associated costs, and neglecting those distinctions in local surcharges means that you, not your customers, end up covering those costs.
For your sales team to optimally approach discounts and surcharges when in negotiations with customers, they would benefit from having tools to easily create various discount scenarios and assess their impact on margins. In a central tool, sales managers can automatically generate agreements from each case individually by considering its unique customer requirements and other factors like geographic location. And, on top of that, they’ll be able to visualize the impact of that decision on profit margins.
By taking a more nuanced approach to discounts and surcharges, accounting for diverse customer, region, and sales segments using data-driven tools, sales team can ensure that every customer agreement is optimized to support profit margins.
6. Maintain Adaptive Pricing for Evolving Product Lines
As your manufacturing company evolves to keep pace with global competitors, so will its product lines.
But without identical products as benchmarks, pricing for superseding older products, replacing parts, or introducing entirely new products becomes a time-intensive and entirely custom task – running the risk of delaying time to market and jeopardizing projected revenue.
To avoid delays in bringing new products or parts to your customers, your company should have the means to quickly calculate prices right at the time these products are ready for purchase.
To close the gap between when new products are available and when their prices are established, consider setting up a more proactive system. In this system, your pricing team can line up new product prices ahead of time according to its pricing strategy, automatically triggering optimal pricing later once a new product, part, or upgrade pops up in the ERP system.
With a more proactive approach to price setting for new products, your manufacturing company ensures consistently competitive pricing while it refines its product lines to integrate more sustainable practices, cost efficiencies, and innovation in the market.
How Can Pricefx Software Help Manufacturers Maximize Profitability?
In this article, we called out a few ways that manufacturers, like you, can support more profitable outcomes for their company by leaving manual pricing behind and optimizing pricing strategies and processes with the help of data-driven tools.
However, the strategies mentioned are no by means exhaustive. For an in-depth account of how enterprise pricing solutions tackle challenges in the manufacturing industry and foster growth, head to our article on how Pricefx accomplishes this:
