Pricing Excellence Program Setup: Creating efficiency with analysis – doing more with less

In most specialty chemical companies the majority of individual customer/product pricing decisions are made by product line or segment marketing managers based in part on inputs from finance and sales resources and guidance from business leadership. While it is important for resources with clear ownership of pricing decisions to be completely aware of all available price and margin data, companies often make the mistake of relying on these resources to construct pricing analyses themselves as part of their daily responsibilities – a task they are often too busy to accomplish. By carefully constructing analyses in a standardized format, organizations are able to take advantage of scalability to significantly reduce the burden of analysis creation (data extraction, cleansing, manipulation, presentation) – which allows resources to spend significantly more time hunting for and implementing price and margin improvements instead of performing hours of analysis.

For example, a sample chemical company with four global businesses, four regions per business, and three segments per business would have 48 different segment managers in charge of pricing. If each segment manager spends 5.5 hrs preparing the analyses for their segment, the company would be allocating 264 resource hours per month to simply preparing analysis. Had the company had one dedicated resource taking advantage of analysis scalability, the company might only require 11 hrs of resource time to produce the same output – which would free up significant amounts of time for more value-added activities.

For guidance on leveraging your pricing capabilities please contact us anytime.

An Alternative to Million Dollar Software

More and more large and medium-sized corporations have either implemented or attempted to implement a sophisticated suite of pricing software that includes an analytics engine. Unfortunately several of these companies have abandoned millions of dollars in software investment due to usability (user experience) and/or utility (ability to generate margin improvement opportunities) problems. Regardless of the cause for these struggles, organizations should step back and examine alternative processes outside of expensive pricing software to reach analytical goals. Recent advancements in Microsoft Office and Excel may allow you to do much more with much less.

Next Level Pricing specializes in creating analytical frameworks that allow companies to identify millions of dollars in margin improvement opportunities - without spending millions of dollars to find them.

For more information please contact us anytime.

Next Level Pricing buys ad space on the MDRT Airstream

Next Level Pricing recently purchased its first ad space with The Million Dollar Road Trip (MDRT) – a cross-media marketing business promoting, celebrating and inspiring the American entrepreneurial spirit today. Brothers Walter and Patrick Hessert are in the midst of a 365 day journey criss-crossing the country living in, and selling ad space on, their 23 ft Airstream. A small Next Level Pricing logo on the right (curb side) of the Airstream is currently making its way through the Southwest – along with the logos of dozens of American businesses.

For more information on Walter and Patrick’s mission, please visit their website.

How Recovering Costs Can Destroy Your Share Price

Conventional wisdom tells us that a 6 cent increase in costs requires a 6 cent pricing increase to maintain margin - unfortunately for companies interested in maintaining their margins raising price to match costs won't be enough to keep investors happy. As more and more chemical, pharmaceutical, and other manufacturers stress their high margin %s as a justification for higher multiples in their stock price, Wall Street analysts are paying nearly as much attention to margin %s as overall results.

In this example below, a company has successfully raised priced each year to match increased costs. Their reward? A large drop in their margin % and likely a large dip in their stock price to match.


Understanding how to properly structure price increases to maintain margin is just one important consideration for an organization's pricing efforts. For guidance in this area or to understand more of the challenges to optimal pricing, feel free to contact us anytime.

Why pricing delivers vs. cost cutting measures

Almost any literature you read from consulting firms or pricing software vendors will without a doubt state the case that improvements from pricing have much larger effects than improvements in fixed costs, variable costs, etc. As this has become commonplace more and more literature simply assumes this benefit advantage without exlaining the logic behind such an assumption.

While it is true that $1M in pricing improvements would have the same impact as an equivalent $1M reduction on variable costs, pricing's placement on the income statement provides it with leverage over smaller cost buckets - thus making it much more likely for organizations to have $1M in pricing improvements available to them vs. $1M in cost reduction.


As the above diagram depicts, this sample organization would need to cut variable costs by 2.9% to have the same impact as a 1% increase in price. Fixed costs would likewise require a 4.3% reduction to have a similar impact. Organizations looking to take their profits to the next level need to understand cutting costs will only take you so far - as pricing has the ability to take you 3-4x further at similar levels of effort.

Next Level Pricing white paper published in The Pricing Advisor

Next Level Pricing's recent white paper on key questions to ask/answer before considering a pricing software implementation was one of three articles published in the August 2010 issue of The Pricing Advisor, A Professional Pricing Society Publication. For more information on the Professional Pricing Society, please visit their website at www.pricingsociety.com

New White Paper: Why Professional Athletic Organizations Are Vilified For Maximizing Their Revenue (And Other Entertainment Options Get Away It)

Our latest white paper examines the root causes of resistance to price increases professional athletic teams face. Unlike airlines, hotels, and cruise lines who are able to price their inventory based on supply and demand, athletic teams are generally locked into fixed ticket prices for a given year - then suffer the wrath of fans when they're increased during the offseason. There are a variety of root causes behind this rage, some legitimate and others somewhat misguided.

We'll publish the entire paper our current and prospective client base enjoys a preview. Until then for a copy of the paper that breaks down the root causes of resistance and outlines a plan for teams to maximize their revenues while minimizing consumer discontent, please contact us anytime.