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PIP’s Pricing and Margin Improvement

PIP has a structured set of tools and analyses to improve sales and profitability by understanding product profitability, pricing processes, value pricing, and pricing reporting and accountability. PIP’s approach to improving pricing and margin management involves five steps:

Find the money
Develop the ideas pipeline
Clarify accountabilities and roles
Hardwire in good operating disciplines
Training and coaching

Our value driver tree work is core to our approach and is used in all the steps.

Find the Money

PIP has identified a number of common issues that our clients face in relation to pricing and margin management:

Wide variability in pricing for the same product even within the same industry, same region, and at times for the same customer.
Pricing not aligned to cost-to-serve due to variations in order size, service needs and contract duration.
Lack of value pricing with high specification products often priced at a similar level to low specification products.
Price leakage relative to agreed pricing.
A large number of expired contracts that have rolled-over with favourable historical rates.

During the diagnostice phase, we identify the root causes of these issues through value drivers analysis and establish the improvement potential for each driver (price by product, alter discount mix, transport costs, inventory levels, quality costs, working capital, which products, for what market and planning schedule). Other elements of our pricing diagnostic include:

Review and analysis of existing segmentation
Analysis of value pricing
High level cost-to-serve analysis by channel
Reporting, KPI and accountability analysis

Develop the Ideas Pipeline

Next we work with the stakeholders to generate and prioritise improvement ideas along each of the value drivers. Ideas are assigned to owners and tracked using the Action Tracker and weekly reviews. PIP also provides support, where required, to implement these ideas. Examples of this include the development of on-line and sophisticated pricing tools, simplified segmentation models and cascaded weekly sales force reporting.

Clarify Accountabilities and Roles

Clear role definitions ensure no overlaps and no gaps in accountabilities between players in the sales chain (from production scheduling, rejects, prices, discounts, debtors days ...)

Hardwire in Good Operating Disciplines

Good operating disciplines include automating the tracking and reporting of results and KPIs, developing these into individual scorecards and establishing weekly individual reviews of Results and Actions. This makes it easier for managers to get their people focused on the priorities and to regularly coach and support them with their actions.

Training and Coaching

As with all our work, there is extensive training and coaching at all levels in the organization. This covers both improvement skills, basic financial and economic training and also many elements of performance wiring so people can operate and manage their people to deliver ever improving results.