Why implement new pricing strategies? And why even think about investing in a new pricing software? What is the purpose? Let’s be honest, it is quite simple. The purpose is to generate more profit. Period.
Sure, there are other important reasons too. For example, we all know how overpricing can hurt the long-term brand value and customer loyalty. That matters also. But without that pure financial gain, which is found through avoiding setting prices too low, it would be difficult to justify spending resources on implementing new pricing strategies.
The key question, then, is: How large a financial gain could you harvest from your aftermarket? How do you find and implement it? And how can you make that new profit level sustainable over time?
In this article, I will share my thoughts on how to answer these questions. My intention is to share what I have seen and learned during the last ten years as a pricer, a reflection of my own experience of implementing smart aftermarket pricing for multiple B2B and B2B2C companies over the years.
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In my career, I have been implementing pricing strategies for numerous manufacturing companies. Even though they all are unique, they usually have the following similarities in their portfolios:
They have thousands of parts
There is a mix of manufactured and purchased parts
Some of the manufactured parts are easy to copy, others are not
The cost of the manufactured parts is driven by factors not relevant to the customer; is the product in mass production? Have we switched suppliers? Are there setup costs needed to start production again? Etc.
Few parts represent the majority of sales
It’s dangerous to overprice low selling products, as one high price is enough to damage customer relations
So, how best to price such a portfolio? There are thousands of products, you cannot look at each of them individually. The cost is a terrible base for manufactured parts, pricing one too high is enough to upset and lose a customer forever.
What we have ended up implementing is a combination of strategies, all suitable for different parts of the portfolio. Let me share on a high level what these strategies are. Continue reading »
Do you want to learn more about pricing theory? Do you want to be inspired by examples of real-life pricing examples? Do you want to be able to create more effective pricing strategies? Or are you interested in absorbing every bit of information from authorities on pricing?
Below you find 7 pricing books handpicked by our pricing specialists which will get you a long way and that we have found extremely useful. This is far from a definitive list, of course, but it’s a great start. Continue reading »
I have seen it so many times. How companies cure the aftermarket business with the same medicine used for their other businesses.
And guess what… they usually end up giving away margin, losing sales volume, and sometimes even destroying their brand reputation.
Have you seen it too?
So how can you optimize your aftermarket without ending up in any of these pit-falls? Well, the first thing you need to do is understand how your aftermarket is different from other parts of the business.
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