Be more competitive where you must and make more where you can with Profit2.
Lean times have increased the importance of the most visible element of your marketing strategy … your pricing.
The sheer number of customers and items you sell makes it difficult to optimize your pricing on each transaction. As a result, sales people tend to price most items at or near your average margin.
A Middle-Ground Pricing Strategy Can Cost You Sales and Margin
When sales people “play it safe” and price at or near the average margin it works for many sales. Unfortunately, it doesn’t work well when it comes to pricing large volume orders and when pricing incidental purchases.
The middle-ground strategy can undermine your competitiveness on large orders and quotes. Profit2 can help your salespeople easily determine the optimum price point for each sale.
Pricing incidental sales offers another challenge. Few sales people have the time to research and decide on the optimum selling price for an incidental sale. The average firm will make hundreds of thousands of these one and two time sales. In the absence of the right system, your sales people will leave money on the table and price too close to your average margin for the least price-sensitive sales.
We’ve analyzed the pricing of over 100 companies and found that …
- Companies average only a 5-margin point spread between customers who buy $100,000+ a year and those that buy less than $10,000
- They only charge a 2-point premium vs. their average margin on items their customers buy once a year
- Most firms lose money on their smallest customers when “cost to serve” is considered
- Special orders are priced too close to the average margin at most firms
- Companies can increase margin on “incidentals” without hurting sales, even in tough times
- Large volume orders and job sales can be increased 10+% by further differentiating pricing by customer type, volume and other determinants
See How You Compare on Key Opportunity Indicators
Compressed Margins
Weak Correlation
Margin Differentiation