Manufacturers face a range of complex challenges, including intense competition, rising costs, and accelerated product lifecycles. Technological investments in enterprise systems such as ERP, SCM, PLM, and CRM over the past ten years have helped curb operating costs and increase corporate agility. As these features are widespread, it no longer offers a competitive advantage. Increasing Manufacturing Profits
One of the functional areas that are best suited for a quantitative approach is pricing. Data-driven customer segmentation and optimization models can recommend prices that are much more profitable than those currently on the market. This pricing science can be easily applied through analytical and execution applications, enabling smarter decisions and better execution in all pricing business functions.
Given current pricing practices and their significant impact on financial performance, the potential benefits of pricing initiatives are enormous.
In addition, manufacturers’ broad product lines, numerous customers, and the negotiated sales model create a business environment that is very conducive to a scientific approach to pricing.
Early adopters’ pursuit of an intelligent price advantage led to the development of commercial solutions. Since Zilliant has worked with manufacturers for many years, Zilliant’s industry-specific pricing applications offer the fit and flexibility they need.
So far, only a limited number of success stories have been published due to the sensitive and strategic nature of pricing practices. This lack of publicity is due to the growing use of advanced pricing techniques and applications in market-to-business markets, including manufacturing.
As the leading practitioners achieve significant, measurable benefits, more and more manufacturers are investing in price-related initiatives.
ove business performance. However, many are just beginning to exploit the potential of applied business intelligence applications that use data from operational systems to improve enterprise decision-making. Some of these companies have so deeply adopted sophisticated analytics and optimization systems that some management strategists have called them ‘analytics competitors’.
No matter how widespread the use of business analysis, the use of more quantitative approaches to pricing can yield significant financial gains.
Many prices ’current pricing processes are manual and largely ad hoc, leading to cheap pricing leaving a significant margin on the table. In most cases, price, discount and other margin driving conditions are arbitrarily based on precedent and circumstances rather.
Then on empirical analysis and strategic intent. Even companies that apply price determinations manually, e.g. basic price segmentation. Will benefit greatly from more precise price differentiation that can only come from advanced quantitative models and optimization techniques.
Following the example set in other industries such as airlines and hotels, some manufacturers started pricing initiatives years ago. Their focus was on two areas: controlling discounting and applying optimization techniques to leverage price elasticity.
These early adopters realized that the sooner the financial benefit, the sooner they started. In almost every case, these projects exceeded their projected return on investment, and in some cases. It yielded millions of dollars in incremental profits. Many more companies in a wide range of manufacturing sectors (industrial, high-tech, chemicals).
Are confidently following similar pricing initiatives as they learn from these compelling successes.
And why did it take so long for manufacturers to start applying quantitative pricing methods? Answering these questions is an understanding of the three key pricing challenges for manufacturing and the opportunities to overcome them. The answers also indicate the most important abilities to take advantage of these opportunities.
1. Ad-hoc pricing facilitates price differentiation: diversified manufacturers usually have extensive product portfolios and very significant customers. After taking into account all price variable variables (eg costs, contracts, discounts, volume agreements, adjustments, shipping, etc.).
The total number of unique prices can easily exceed 100,000 at one time. With so many products