Pricing and Margin Management
In a rapidly evolving market, the need for new variants increases fast. You find that your pricing mechanism is no longer able to keep up with these dynamics. Pricing thousands of configurations is still feasible, but once variations run into the millions, it becomes impossible.
There is a strong temptation to apply a fixed margin on top of the cost price (‘cost price plus’) when establishing the sales price. By doing so, however, you would be selling yourself short, badly. After all, a new option may be low cost in terms of production, but it may generate immense added value for the customer. And perhaps the customer is legally obliged to purchase a particular option. In that case, they are prepared or obliged to pay for it. ‘Cost price plus’ is in fact too simple an answer to a complex reality. It generates significantly less margin compared to your potential gain through smart cost management. Consequently, you ignore the shortest route to maximizing your profits. Failure to benefit from your own innovations is bad for business.
You know that ‘customized deliveries’ require a dynamic and nuanced pricing and margin policy. But how do you ensure that all the price variables are done justice? How you do you factor in the importance, the value that options represent to your customers, into prices? After all, all your customers have different applications. They all have to consider varying (legal) regulations. They are defined by different products in different competitive positions. A combination of options may be a valuable variant for one customer, yet mean little to another in terms of added value. How do you ensure that you do not ask too much with the risk of losing prospects and customers or ask too little and miss out on better margins and pure profits?
The solution: smart pricing and margin management
What you need is an intelligent system which will take all these price variables into account. Sofon has an excellent solution for this. Our software modules allow very detailed pricing and margin management, which perfectly meets your needs. No need to ‘overhaul’ your ICT system; our software modules are compatible with your CRM and ERP systems.
The essence of the Sofon solution is that you record every price variable in the form of a concept (a piece of knowledge) in advance. All you then need to do is merge the concepts applicable to a certain customer. This generates a realistic, fair price with maximum margin, regardless of the situation, enabling your sellers to remain completely consistent in all their offer versions.
For example, you can record your competitive position in relation to a certain dimension of a product. The fact whether an option is required or not. If this varies by country, you can also compensate these differences. You can thus adjust your prices, depending on who you are selling to, i.e. a dealer or end user. Anything you want to take into consideration can be included in our software modules.
You are not unnecessarily expensive or unnecessarily cheap. This prevents prospects and customers turning away because of high prices or you missing out on profits if prices are too low.
You are able to set higher margins and thus take the shortest route to increasing your profits.
Because you record price concepts in advance, you are always in a position to rapidly respond to new market requirements, in the form of correct and appropriate prices.
Adequate pricing and margin management leads to consistent offering, making you reliable as a business and putting your sellers in a stronger negotiating position.