Setting a price for a product is one of the most important decisions a company can make. When formulating a pricing model, there are many considerations to make. Cost of goods sold, customer value, inventory control fees, and competitor pricing are just a few. Companies that lack an organized system to manage all of these details can find themselves at a grave disadvantage in today’s competitive marketplace.
As we continue our blog series on financial management strategies for manufacturers, importers, distributors, and retailers, it is essential that we cover the issues surrounding product-pricing management.
Let’s begin by setting the stage for why product-pricing management is at the foundation of a healthy, growing business. Companies that price their products incorrectly, are less competitive and less profitable.
Competitive pricing is difficult even with the most sophisticated tool set, but pricing without the proper tools is worse, usually being highly inconsistent, constantly leaving customers and profits on the table. However, with the proper tools, strategic pricing can be implemented using one of two distinct approaches.
The first we will cover and the easier of the two methods is Strategic Costing. Strategic Costing allows the company to set a strategic cost and then have the cost flow-through to the proper pricing. Please contact us if you would like detailed information on how this technique can be implemented.
The second method is Strategic Pricing. This method is more difficult and more time consuming, but when properly implemented can completely change the profitability of a company, without risking the loss of any customers. Again, please contact us if you are interested in obtaining detailed information on how this capability can be implemented in your business.
In addition to Strategic Pricing and Costing, there are several other practices that affect pricing and profitability. Warehouse solutions must minimize inefficiencies and redundancies in the warehouse. Inventory tracking in real-time provides producers and distributors with a better understanding of their processes so that they can better plan product purchasing and shipping schedules.
Understanding precisely where things are in the actual warehouse can also speed up distribution.
By utilizing tracking technologies and automation, it’s easier to understand and rectify any inefficiencies or redundancies. Better inventory systems and tools, in turn, lead to better pricing management and a tighter supply chain.
Have we piqued your interest? Contact an Acumen expert today to discuss!