Manufacturing pricing strategies are top of mind for businesses in this transitionary economy. Industrial pricing has becoming more competitive than ever as margins shrink and supply chain problems persist.
“BluWave is seeing an increased number of resources allocated to competitive pricing analysis from our private equity clients and their portfolio companies,” BluWave co-head of operations Keenan Kolinsky says. “Specifically in the manufacturing and industrial spaces, companies are running into much higher costs for production materials, which is putting a dent in their margins.”
When private companies, public companies, and private equity firms and their portfolio companies contact BluWave for help with industrial pricing, it’s because they’re presented with two difficult options.
1. Increase the Price of Manufactured Goods
This may increase margins, but it also means passing costs along to customers.
They end up paying more for the same products, some of which arrive later due to supply chain and sourcing challenges.
2. Keep Prices the Same
In this scenario, customers continue paying the same price for products. The problem? Margins get thinner and thinner as material and production costs continue to rise due to inflation and demand.
There is, however, a best-case scenario that takes both of these choices under consideration when it comes to industrial pricing.
Manufacturing Pricing Strategies
The expertly vetted service providers in the Business Builders’ Network know industrial pricing strategies for companies like yours inside and out.
“Specialized pricing resources allow companies to stay up to date with their pricing models so they keep margins healthy while maintaining strong relationships with their key customers,” Kolinsky says.
Here are some of the strategies they might employ for your business or portco when you work together.
Understand Your Costs
This includes both your variable costs (those that change with production) and your fixed costs (those that do not).
Variable costs are costs that change depending on the quantity of goods or services produced. For example, the cost of raw materials, labor and packaging are all variable costs.
Fixed costs are costs that do not change regardless of the quantity of goods or services produced. For example, the cost of rent, insurance and equipment are all fixed costs.
Understand Your Target Market
Conduct thorough research to understand your customers’ needs, preferences and willingness to pay.
This can be done through surveys, interviews and focus groups. It is important to understand what your customers are looking for in a product or service, and how much they are willing to pay for it.
Create Value-Based Pricing
Focus on the value your product or service brings to customers rather than just the cost of production.
This means understanding the benefits that your product or service offers to customers and pricing accordingly. For example, if your product or service saves customers time or money, you can price it higher than a competitor’s product or service that does not offer the same benefits.
Conduct Competitive Analysis
Research your competitors’ pricing strategies to ensure your prices are competitive in the market.
This includes looking at the prices of similar products or services offered by other companies. It is important to be aware of your competitors’ pricing strategies so that you can price your product or service competitively.
Consider Pricing Tiers
Offer different pricing tiers with varying features or levels of service to cater to different customer segments.
This allows you to reach a wider range of customers and maximize your profits. For example, you could offer a basic tier with limited features and a higher tier with more features at a higher price.
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Test and Iterate
Continuously test and adjust your pricing strategy based on customer feedback, market trends and business goals.
This is an important part of pricing strategy because the market is constantly changing. By testing and iterating, you can ensure that your pricing strategy is always up-to-date and effective.
Align Pricing with Customer Value
Understand the value your customers perceive in your product or service and price accordingly.
This means understanding what your customers are willing to pay for the benefits that your product or service offers. For example, if your product or service is unique or offers a significant benefit to customers, you can price it higher than a competitor’s product or service that does not offer the same benefits.
Segment Your Customers
Tailor your pricing strategy to different customer segments based on their needs, behaviors, and willingness to pay.
This allows you to reach a wider range of customers and maximize your profits. For example, you could offer a discount to customers who purchase in bulk or who sign up for a subscription.
Data analytics tools – especially AI-driven ones – can make this a much more efficient and accurate process.
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Communicate Value Effectively
Clearly communicate the unique value propositions of your product or service to customers through marketing and sales efforts.
This means highlighting the benefits of your product or service and explaining why it is worth the price. For example, you could create marketing materials that focus on the features and benefits of your product or service, or you could offer free trials or demos to let customers experience the value of your product or service for themselves.
Implement Pricing Discipline
Ensure consistent pricing practices across all channels and avoid unnecessary discounts or price concessions.
This means setting clear pricing policies and procedures and ensuring that all employees are aware of them. It is also important to avoid giving away discounts or price concessions unless it is absolutely necessary.
Regularly Review and Update Pricing
Regularly review and update your pricing strategy to align with market changes, customer feedback and business objectives.
This is an important part of pricing strategy because the market is constantly changing. By regularly reviewing and updating your pricing strategy, you can ensure that it is always up-to-date and effective.
You can get connected with a data-driven pricing resource in less than a single business day.
Set up a scoping call with our research and operations team, and they’ll introduce you to a short list of best-fit service providers to help you capture margins and continue to drive volume.