Dear Friends and Readers,
While many larger industrial and manufacturing companies have embarked on their pricing journey, I’ve noticed a significant untapped potential in midsize companies. These companies often lack the support structure and capacity to build a robust price management organization. However, I believe that even with limited resources, midsize companies can make enormous strides in improving profitability through pricing by following some simple and straightforward actions. For this edition, I had the opportunity to discuss and explore these actions with Dominik Endler, an Executive and Advisor in Strategy, Marketing, and Sales in the manufacturing sector.
Olivier: Dominik, why do you believe that Price Management is crucial for driving profitability specifically for intermediate-sized companies?
Dominik: Intermediate-sized companies often overlook structured Price Management, as pricing is typically managed mainly by sales teams. While effective, this approach misses out on the benefits of a comprehensive strategy. Professionalizing pricing with top management support can significantly boost profitability.
Olivier: I agree, and the good news is that a few actions can help those companies leapfrog competitors.
👉 Secure Leadership Support
Dominik: Olivier, what role does leadership play in this?
Olivier: Pricing connects all business dimensions, and only top executives can fully harness its potential. Companies like Koch Industries and Michelin address pricing and revenue management as end-to-end systems creation, with strong support from owners and executive members. In those systems, the impact of pricing can be compared to a chain reaction among many parts of the business. Leadership support, or even better, ownership, is in the same way an important factor for success in midsize companies.
👉 Align Strategy
Olivier: How can companies align Price Management with their overall strategy?
Dominik: Align pricing with company strategy by adjusting the product assortment and offering services as separate value propositions. This segmentation allows targeted pricing strategies, maximizing revenue across customer segments.
👉 Develop a Clear Roadmap
Dominik: What is the transition from basic pricing to pricing excellence?
Olivier: Companies can achieve up to an 8% net sales increase by reaching maturity levels in pricing. However, without a reliable performance management system, these standards can disappear as people change in the organization. Instead, companies can implement a robust process and establish a performance wedge for continuous improvement. People development is at the core of this approach. And all this can be done also very lean and with limited resources.
👉 Establish a Dedicated Team
Olivier: What do you think, Dominik? Does introducing Price Management increase overhead costs?
Dominik: Not necessarily. A dedicated Price Management owner, supported by top leadership, integrates these practices across the organization. This network organization should include members from various departments, particularly finance, commercial, and sales teams, forming a collaborative pricing network.
👉 Involve Commercial Teams Early
Olivier: Why is involving commercial teams early important?
Dominik: Engaging commercial teams from the start ensures they understand and support pricing management. Their buy-in is crucial as they interact directly with the market. Continuous communication, training, and aligning incentives with pricing performance maintain their enthusiasm and alignment with objectives.
👉 Build a Robust Process
Dominik: How can manufacturers design effective end-to-end processes?
Olivier: Inspired by Amazon’s success thanks to its robust strategy and end-to-end process, leveraging collective intelligence is key. For example, an automotive supplier’s workshop developed a comprehensive pricing system with 58 interlinked sub-processes, emphasizing collaboration, systematic solutions, and continuous improvement. The good news is, that this level of sophistication is not needed to make significant progress. Midsize companies can have lean and straightforward processes for Pricing and still recognize significant bottom-line improvements.
👉 Implement Transparent Governance
Dominik: How do clear rules support successful price management?
Olivier: Establishing clear responsibilities and accountabilities prevents confusion and ensures consistency. Measure performance through profitability, margin improvements, response times, and customer satisfaction. Regularly review these metrics to align the pricing strategy with business objectives and market conditions are needed and can be setup simple and straightforward.
👉 Consider Embracing AI
Dominik: How can AI improve pricing strategies?
Olivier: AI for dynamic pricing can lead to a significant booster for the success of Pricing. Follow a three-step process: choose useful AI use cases, validate them with sales teams, and integrate them into existing systems. Examples include optimizing project pricing and improving demand forecasting. Despite common pitfalls, successful implementation usually takes 6-8 weeks. Intermediate manufacturers should explore AI, perhaps not at the beginning of the pricing journey, but for sure, it is a strong potential amplifier for price management as AI solutions become more and more available with limited cost.
About the Authors 👇🏻
Olivier: Founder and CEO of Resilient Growth Consultants (RGC), Olivier is a seasoned consultant in Profitable Revenue Growth Management in the Manufacturing sector, specializing in Pricing. With experience at BCG and Simon-Kucher, he has advised industry leaders like Holcim-Lafarge, Solvay, and Michelin, as well as mid-sized enterprises and private equity. Olivier has also held senior roles at Tarkett, a spin-off of Total and Nokia.
Dominik: Dominik, based in Atlanta and Düsseldorf, has implemented Price Management strategies in global organizations. His experience includes roles at Bekaert Group, Bayer, Agfa-Gevaert, and MacroSystems. He is now bringing his experience and expertise specifically to midsize B2B manufacturing organizations through his advisory work with EndlerPartners.
Together, they offer valuable insights into optimizing commercial strategies through effective Price Management.
Feel free to reach out to me for further discussion. You can book a meeting with me here. 🚀📍
Best Regards,
Olivier
Dear friends, An article not to be missed in which my friend Dominik Endler and I explore how mid-sized manufacturers can drastically increase their profitability by professionalising their pricing. Let’s enrich this discussion together. Enjoy your reading. 🚀