The Top 4 Pricing Functions Pricefx Offers Manufacturers
Manufacturing industries are currently dealing with price increases in everything from steel to produce, wooden pallets and everything in between, and the increasing prices in raw materials have are eating into their margins. Manufacturing companies are also reeling from the impact of work shortages and increased labor expenses. Additionally, supply-chain woes are placing pressure on manufacturers to raise product prices as demand for many goods rebounds with the reopening of the post-CoVID economy. In dealing with it, guesswork, hunches, and spreadsheets were okay once upon a time, but times have changed. What used to be your manufacturing company’s pricing department tried and true methods are now ineffective. Instead of allowing your sales teams to continue to rely on hunches and hearsay without visibility, the time is right to utilize the deep insights that modern pricing software can provide. In that light, let’s analyze the Top 4 pricing functions that Pricefx can offer your manufacturing company.
At Pricefx, for more than a decade, we have been assisting manufacturing businesses to make transparent, data-informed, real-time pricing decisions. And that technological help allows them to protect their profits and evolve into becoming agile and robust pricing organizations.
In this article, we will analyze the Top 4 pricing functions Pricefx offers manufacturing companies and how when implemented, those innovative pricing features can help your business become more efficient and profitable.
Pricefx’s Top 4 Pricing Functions for Manufacturing Companies
Let’s dive in and get started by checking out the Pricefx Top 4 pricing software features that offer direct benefits to manufacturing companies, before delving in depth as to how each of the functions may assist your organization in your pricing endeavors.
(Two important things to note;
The relevance of the information below is dependent on your manufacturing company’s level of ‘pricing maturity’.
The below is not intended to be an exhaustive list but instead covers the main pricing pain points that manufacturing companies are finding unique solutions to with Pricefx pricing software);
- Speed of Recalculating List Prices
- Forward Load Your Costs
- Agreements & Promotions Management
- Sales Compensation
1. Speed of Recalculating List Prices
Standard pricing processes and performance reviews of your products are often too slow to manage rapid change in a magnitude that has not been experienced for many years. Your pricing team must be able to monitor what approved price levels are, have customers been notified of price changes on time to avoid margin leakage? Has your manufacturing company updated price levels to keep you on track to achieve your targets? Given the current rate of raw material price fluctuation, this can mean tracking results at a customer-item level on a weekly or even daily basis to gain an understanding of where to increase focus.
It’s precisely a problem that European tire manufacturer, Michelin, came to Pricefx to solve.
One of the key challenges Michelin was facing was keeping track of the cost of rubber, steel, carbon black and other raw materials that were constantly increasing. They simply could not keep up with the cost increases because they were changing so rapidly. Updating price lists took as long as 2 months and meanwhile, profit margin slipped out between the cracks as prices kept on rising.
Using the Pricefx Price Setting functionality, Michelin cut their recalculation time for price lists from 2 months to 20 minutes!
Now Michelin in 20 minutes can set, manage, and optimize prices across their entire product portfolio and get a handle on complex pricing activities in one place. The price-setting and price optimization tools work together allowing Michelin to make the most of their pricing strategy. All while minimizing margin leakage and increasing bottom-line profit.
What is also means with those kind of time savings, pricing teams can be repurposed to go and discover additional pockets of value. Instead of preparing price lists for 2 months, Michelin’s pricing team went out and discovered other points of value for 2 months. So, during that time, they went about discovering approximately 1 million euros worth of value from underpriced products – additions to their bottom line they never knew they had.
Pricefx assists by turning your reactive pricing department into one that’s much more of a strategic asset for the business to use. Your pricing team can refocus on finding your pockets of value, or doing things better, which can really shift the dynamic of the pricing team within your business.
2. Forward Load Your Costs
In the current manufacturing industry environment, if you have not changed your prices at least once (or possibly even more often this quarter), due to rising costs, the chances are you’re missing out on plenty of profit that is being left on the table.
Focusing on changing price levels of raw materials and fuel, businesses are being required to maximize their profits by making tweaks to their prices every time it’s necessary to do so. And right now (depending on your precise business model and the scale that you wish to operate), that could be as often as every day, or even every hour. Do you fancy predicting what your costs will be next month in an Excel spreadsheet? No, we wouldn’t fancy it either.
Learn More Tips Here on How to Manage Fluctuating Prices & Margin Erosion
As an additional highly attractive function to manufacturers, Pricefx’s Price Setting also allows you to do advanced modelling, such as forward loading into the system what your costs will be next month.
For example, if you are a manufacturing company, your cost inflation is currently ballooning with all the raw material increases. With Pricefx’s solution you can proactively forward load your costs in their system, so it can give you a range of price insights into next month when costs are predicted to increase by 3% (but it could be as much as 7%.) Or whatever those changes are (in combination with your business strategy), you can forward load those costs, and undertake price modeling before those costs hit. In other words, you can get ahead of the game with any price changes.
There are more positive ways than simply reacting to a cost change which has already happened, and you’ve already lost margin. You can become more reactive to that and increase your price lists in that 3-to-7% price corridor of your choosing (and based on your modeling) before going to the marketplace even before the new month has begun!
Imagine you did not have this ability to predict your future costs for your $500 million revenue manufacturing business, and that you have already lost margins of 3% due to rising costs per month for 2 months straight. Sure, 3% may not sound like a lot, but what if we did the math and told you you’ve leaked $15 million per month in margin for 2 months?
Any converts out there for forward loading your costs with Pricefx?
3. Agreements Management
What if you could bring in more insight and details around the range of products your customers buy from you? Do they buy lots of different products across your whole entire manufacturing portfolio or are they very focused on purchasing from one of your specific product lines?
Do your customers place large orders, or do they have lots of special requirements? Are they meeting the requirements of your business agreements to secure their discounts, or are they missing the mark? When you have access to better segmentation of your customers, you can then actually give them more appropriate and better pricing that will secure win-wins for you, and for them.
When you put yourself in a position to know more about your customers, you can understand them better and supply them with pricing that is relevant to them and your unique relationship with that organization.
Most manufacturing companies already have some sort of customer segmentation. Often, it’s based around historical spending with that business. They might bring in a little bit of forecast spend, or potential spend, but it is often only a very one-dimensional perspective of customer segmentation.
Leveraging the customer segmentation made possible through Pricefx’s Price Optimization and then applying that information through the Agreements & Promotions Management system will allow you to maintain that unique customer pricing in a much better, targeted and more specific way.
The Agreements & Promotions functionality of Pricefx can be used for:
- Regional and seasonal discounts for different segments of customers
- Standard discounts for a particular product group that should be always added for the volume purchase above ‘X’ number of units
- Assuring that the subsidiaries of your umbrella customer automatically receive the discounts that were negotiated too.
- Limiting the possibility to use discounts that drain margins and affect your profitability.
- Managing condition term types using logic with predefined elements/parameters
- Creating and maintaining agreements
- Performing agreement calculations
- Executing approval workflows
- Managing and tracking discount records
- Using agreement and promotion insights through other Pricefx functionalities (such as the Price Optimization mentioned above)
Managing agreements through the Pricefx’s Agreements and Promotions suddenly brings a lot of visibility and clarity to what your price agreements are and how appropriate they are for your company and how long they have been in place. For example, if they made volume purchasing commitments to buy 10 000 units of products, are they actually purchasing or on track to purchase those 10 000 units? Are they committed to buy? Consequently, you can also start to measure how your customers are performing in a much clearer way and remind yourself why you are offering them a special price.
4. Sales Compensation
Have your ever thought that your manufacturing company could use a tool that brings the clarity to the account manager for sales managers and everyone else around you, as to how they are performing on their sales targets as way to forecast the likelihood of achieving your quarterly or annual growth targets?
If your manufacturing business could get that kind of early notification, (e.g., that maybe your organization is overall performing sluggishly against individual sales targets?), then you could potentially go ahead and push your products more aggressively where and when required.
What’s more, if your company suffers from little to no alignment between distinct functions of the business (sales, pricing, marketing) it can lead to compensation plans that do not follow your company’s objectives.
For a lot of manufacturing businesses, their salespeople are the main drivers of bringing in deals and making money. So, it is no surprise that you would want to make sure that they are well compensated. But how do you make the sales compensation plan effective and fair so that your sales team continues to be motivated to bring in deals that grow your business?
The unique Pricefx Sales Compensation function is a fantastic way for your salespeople to gauge how they will make money and can serve as an indicator of how your organization will grow its revenue. The compensation plan is built to incentivize selling behavior by:
- Ensuring that salespeople sell within the given guidelines
- Selling larger deals,
- Or selling more deals depending on the needs and goals of the individual and organization.
And of course, the Pricefx Sales Compensation features empower your business to have a sole source of truth bridging the gap between the pricing and sales team and working together to achieve the company’s objectives. When that kind of business alignment happens, everyone will be working together to achieve your organization’s unique set of business objectives.
Discovering How to Use Pricefx to Implement Your Manufacturing Pricing Strategy
Now you have learnt 4 special ways that Pricefx can specifically assist your manufacturing company to achieve your unique set of business objectives and turn your pricing strategy into a winning one.
Or are you still considering how to transform and implement a new pricing strategy for your organization?
Check out this handy article below for more advice on implementing your company’s pricing strategy:
However, if your manufacturing company is more of a ‘pricing mature’ one, and you already have your pricing strategy in place, you’ll want to talk today to one of our pricing experts to get started with implementing Pricefx;
About the Authors
Iain Lewis has worked in pricing as a practitioner for over 10 years working at Automotive, industrial goods, business services and Distribution companies. Iain brings his unique perspective to each engagement to guide companies through complex buying decisions and has helped companies throughout Europe and South-East Asia continue to improve their pricing approach.
As a pricing professional, Sara-Marie Gansert has been supporting companies across various industries to improve their margins by finding and realizing the right pricing strategies. Now working as a Solution Strategist for Pricefx she introduces businesses to pricing software tailored to master their individual challenges in pricing. On the weekends you will find her hiking in the Black Forest, exploring the cities of Europe, or enjoying a good book.