Can you assume that the pricing of your products and services are spot-on? Consider that every sale made represents a price point that was acceptable to the individual buyer. This means that all sales in your business represent sales wins as opposed to lost sales. We know that the customer was willing to pay the price that you presented. But, were they willing to pay more? Did you miss an opportunity to earn a larger margin?
Sales win data can tell us a lot about what customers are willing to pay, especially when there are wide variances in prices for a single item. Price variances for wholesale distributors and manufacturing companies most often occur when the sales team has some authority to discount or set prices. Without sufficient guidance, prices can vary considerably. Try looking at these varying prices a different way – as market-based price testing that can provide insight into willingness to pay.
For example, if you are selling a specific item to 50 different customers who are in the same market and have a similar profile, prices for this item might vary from $10 per unit to $28 per unit. If 40 of these customers are paying closer to the $28 price point, why wouldn’t the remaining 10 customers who are paying closer to $10 be willing to pay more? The evidence in the data suggests that they would. However, without this insight, individual sales reps are left with only their own experience and judgment to make price decisions.
This is a common scenario among wholesale distributors and manufacturing companies. In fact, our price consultants find that these companies are typically leaking 2 to 4 margin points due to underpriced transactions. The problem is that they have no tools or processes to measure their margin loss across a large number of items, customers and markets. While some analysis can be performed manually using spreadsheets, a comprehensive and granular data analysis using an automated system is necessary for pinpointing opportunities at the individual item level.
So, how much of your business is underpriced? PricePoint Partners has the tools to analyze your sales data and reveal your margin loss. Call our price consultants to learn how you can gain new insight into your pricing opportunities.