A leading manufacturer of specialty fasteners used in heavy equipment and architectural applications was struggling to maintain control over the pricing of its 40,000 potential SKUs. The firm carried raw material inventory and produced the exact specified fastener on a made-to- order basis. The combination of possible sizes, finishes, thread pitches and other product features made for a complex pricing environment.
While the firm had developed its own pricing system to accommodate the myriad of product iterations, management believed they were leaving money on the table. At the heart of their system was a cost-plus pricing strategy that used the same formula to determine prices across the board. Estimators would calculate the cost to make each fastener and add a flat percentage.
Price Point Partners performed an analysis on the company’s historical pricing data using PricePoint’s proprietary analytics engine. The analysis revealed that higher-value fasteners were being priced at the same level as commodity fasteners. And all customers, regardless of their size and price sensitivity, were priced at identical levels.