Pricing is one of the most important factors in the success of a business. In fact, 62 per cent of millennials say that price is the top influential factor when making a purchase. Increasingly, customers are exercising the ability to compare pricing and ensure they get the best deal: manufacturers and retailers must respond to this trend with agile pricing models.
However, despite how vital pricing is to improving revenue and profit margins, many manufacturers stick to the status quo when it comes to service parts pricing. Outdated pricing processes based on Excel spreadsheets and legacy ERP systems create more work and headaches, and cause manufacturers to leave money on the table.
Modern pricing technologies, on the other hand, can help manufacturers increase service revenues by up to five per cent, and gross profit margins by more than seven per cent. If you still need convincing that an investment in service parts pricing technology would be worthwhile, here are three ways that it can help manufacturing companies streamline pricing processes and drive additional revenue.
Identify value drivers
More and more manufacturers are turning to after-sales service – the service delivered after the initial sale of a product – to optimise their revenue streams and improve the customer experience. As manufacturers around the world are faced with a volatile durable goods market, as well as disruption from companies like Amazon, competitive pricing that positively impacts the bottom line is more important than ever.
As after-sales service becomes a source of new revenue for manufacturers, it can be challenging to identify value drivers that differentiate a company’s products from competitors. However, modern pricing technology – instead of outdated cost-plus logic and Excel spreadsheets – allows manufacturers to price items automatically based on market conditions like demand, competitive prices, geographic region and even weather. This will help them identify and capitalise on ways to bolster each individual part’s value to match changes in customer behaviour and product demands.
For example, while a 24 pack of water might cost £4 at the supermarket, on a hot day at the beach, you’d probably be willing to pay £2 for just one bottle. Nothing changed about the quality of the water, but the benefit increased, so the value of that water has increased.
As consumers, we all spend time mulling over pricing. As professionals, it’s easy to forget the simple recipe for pricing success: whether the customer accepts the price itself, and how the price relates to margins. If a price is too high, customers will likely hold off on a purchase, or perhaps find a vendor with a better price. Ninety per cent of shoppers say that price is the leading reason why they leave one brand for another. And if the price is too low, companies will be practically giving away service parts inventory, and missing out on crucial revenue.
But what if you could gather pricing feedback from your salesforce and have the ability to adjust prices accordingly? Modern service parts pricing technology paves the way for manufacturers to receive an ongoing stream of feedback from around the world in one central system. This allows companies to easily tweak prices by region to make sure each one produces the best possible profits.
Big data has permeated virtually every business sector today. In 2017 alone, spend on big data and business intelligence is on pace to reach $150.8 billion. And given how critical data is to properly pricing products, if manufacturing businesses are unable to store, access and analyse data effectively, they’re undercutting their chances of competing with other organisations within their space.
Manufacturers should learn to adapt and forecast service parts pricing as quickly and accurately as possible to drive continuous, strong revenue. Further, they should figure out how to tie this pricing reporting data back into their existing BI pool. Modern service parts pricing technology will provide this, as well as a complete view of business operations to allow for the most appropriate and timely decisions possible. Without technology, pricing data is often too fragmented and disparate to make quick decisions, which can have significant negative consequences on business performance.
Service parts pricing can feel complex, but it doesn’t have to be. Sophisticated service parts pricing technology allows manufacturers to unlock previously untapped revenue streams. By adopting new technology and business practices, manufacturers can stay on top of their service parts pricing operations, while also gaining a deeper understanding of both their customers and the market conditions.