Mastering Cost Plus Pricing With WayPoint
Dr. Jonathan Bein, President — Real Results Marketing
• WayPoint Analytics • pricing strategies • cost-to-serve math • cost-to-serve in distribution • Randy MacLean • distributor sales analytics • cost to serve analytics • Gross Profit Margin • Real Results Marketing • Jonathan Bein • Dr. Jonathan Bein • sales tactics • customer profitability • segmentation methodology • effective marketing segmentation • fixing customer profitability
Thursday, April 18, 2019—Companies haven't had visibility into many of the things that can now be seen clearly, because they've been operating on the "fool's gold" of gross profit.
In the case of many pricing programs, when implemented, companies will get better margins, and even profit increases. However when looking deeper into things there are prices set that will guarantee losses with certain products/product lines. In various pockets of their business they are destroying their ability to make profits.
So why couldn't we gain the opportunity to price everybody as they should be? We came to find that it's because profitability of a relationship has everything to do with the cost to serve (CTS) of that relationship, and yet CTS was never considered in the pricing programs.
The fatal flaw in even the most sophisticated programs up until recently has been that they're based on the concept of market pricing. The underlying philosophy being that certain markets, commodities, and customers, are used to paying a given price level. When a company is underperforming in reaching that price level, the opportunity lies in getting them to market levels. It's assumed that the company is underpricing their products in the market, and that's where the opportunity lies.
In the days before google, it was very hard to tell what people were paying, and those pricing differentials between markets presented certain opportunities. However now these things are better known, and we're seeing even pricing players have a more difficult time delivering pricing programs that will give the margin gains they would commonly give 10 years ago.
When looking at CTS we see enormous opportunities in pricing for companies, and we believe that pricing should do more than squeezing out a bit more margin. It should be a broader, more powerful tool for selecting the customers you target in the first place.
Pricing that you tie to cost is a win-win for everyone, because customers that work with you can gain a pricing advantage without a hit to your bottom line, or theirs. Pricing with CTS is going to be the cornerstone of pricing in the future because of this.
For more information about Dr. Jonathan Bein, visit: www.realresultsmarketing.com