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Is the Price Right for Your Manufacturing Company? | Carr, Riggs & Ingram

As the economy headed downhill and the “L” of P&L statements became dominant for many manufacturing companies, cuts quickly became synonymous with normal. From cuts of labor force through layoff or hiring freezes to cuts in expenditures, these downsizing techniques became a survival strategy. However, some manufacturing companies stopped with the cuts and did not reassess the pricing models of their products and services. While this tactic requires research (which can be especially cumbersome with a lean management team) and much more effort than guessing the price of an item on a game show, the correct product pricing improves profitability in all economic circumstances.

For example, a customer who buys an optional part for a machine that is not very important to their overall product will be less tolerant of an increased price (and be sure to consider that they may also be following the advice in this article and evaluating their pricing and ways to cut proudct costs). However, another customer using the product as an indispensable piece of their production process will be more tolerant of pricing increases – especially if they are in-line with any competition.

Based upon your manufacturing company’s analysis of Steps #1 and #1, establish relevant and specific pricing and negotiation guidelines after identifying these categories and then assign customers to them, which leads us to Step #3.

While pricing should be flexible, there should be exact points where the deal is not made based upon its impact on margins. Publish these boundaries for the sales team – and ensure that any commissions are accounted for in the pricing structure. Some industries are more volatile than others, but be sure to track specific turning points and create plans to evaluate the pricing structure. Reacting quickly to competitor’s strategies – as well as the volatile economy and any regulation changes – ties directly to profitability.

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Is the Price Right for Your Manufacturing Company?.

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