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Identifying Price Leaks

Are Price Leaks Draining Your Bottom Line?

If you’re managing your prices at the list or invoice price level, then you’re neglecting some important price components. These line items can detract from your profit margins, significantly reducing the net realized, or pocket, prices of your products. For example, you need to factor in:

  • Quantity discounts
  • Rebates
  • Freight
  • Restocking charges
  • Payment discounts
  • Packaging
  • Rush freight
  • Other costs

These elements represent revenue leaks. As you can see in the pricing “waterfall” above, they can send your realized price spiraling downward. In some industries, the cumulative effect of these leaks can add up to 60% of the list price, meaning you stand to lose 60% of the revenue if you don’t factor them into your pricing management.

Price Point Partners works with manufacturers and distributors to identify price leaks and their causes, and to create a plan to recapture the lost margin. In one case, we helped the manager of a $22 million division uncover $2 million in discounts that were draining the company’s income. We can help you find the leaks within your business, too.

We can typically help companies realize a profit lift of 1.5% - 3.0% margin points by providing the framework for:

  • Creating and reinforcing pricing policies
  • Communicating new policies to employees
  • Measuring and auditing category performance