Manufacturers & Distributors ARTICLE -
The Tech behind Inventory Tracking
Bar codes and RFID are two top choices
Target Audience: Manufacturing and Distributing Companies, M&D Industry, M&A Accountants, Distributors
Layoffs, hiring freezes, and pay and budget cuts were the go-to survival tactics during the economic downturn. In the midst of this downsizing frenzy, many manufacturers neglected to reassess their pricing strategy. Doing so can help companies remain profitable and competitive in good times and bad.
The first step to optimizing your pricing strategy requires you to identify specific, low-margin products and services. For example, rather than calculating the profit margins of a broader category or division, look at specific products and customers’ transactions to pinpoint exact areas of low profitability and their causes.
After picking the “low-hanging fruit,” identify and separate customer bases. What does this entail? Because not all customers are alike, you’ll need to categorize them based on their willingness to pay and the amount of value they place on your products.
For example, a customer who buys an optional part for an insignificant piece of machinery will be less tolerant of high prices than a customer who purchases a crucial part for an expensive, indispensable piece of machinery. Establish relevant and specific pricing and negotiation guidelines after identifying these categories and then assign customers to them.
While pricing should be flexible, it’s also important to rein in sales negotiation activity that may be hurting margins. Set and enforce policies that prevent salespeople from going too low as a way to win customers and secure commissions.
Last, but not least, remember that flexibility and responsiveness are crucial to a successful pricing strategy: Companies must be able to assess and react quickly to volatile environments and competitors’ pricing behavior.
Find out how our M&D accountants can add value to your business. Email us or call us at 1 (888) 875-9770.
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