In 12 months, a $42B global manufacturing company increased average revenue by 12% on its top 100 selling parts by introducing a uniform pricing and volume discount policy, increasing profit by 6%.
A $2B media company increased Quarter over Quarter revenue for core products of 18% and the average price for core products of 13%.
Repeated research shows that the most efficient way to increase profit is by an improvement in price. Research from Wharton, AMR, and all of the big consultancies has proven time and time again that of the 4 levers to increase profit (increased volume, decreased variable or fixed costs and increased price), a 1% increase in price has the most significant increase on profitability.
Using data science and AI (Artificial Intelligence) to automate pricing and discount policies frees up the time of salespeople, enabling Requests for Quotes (RFQs) to be answered faster. This contributes as well to greater efficiency and increased profit.
The Furious Team hears the same frustrations from CEOs, CFOs, Heads of Sales, Sales Management, Pricing and Planning, Sales Operations and Sales Finance that we work with every day, across multiple sectors. We have been in your shoes and tackled the same problems and had the same frustrations. That is why we set out to change it.
I witnessed the power of pricing to optimize revenue and profit during my first job out of university, building a corporate pricing group at a global manufacturer with more than $42B in annual revenue. By developing and implementing a uniform pricing and discount policy for our top 100 selling parts and monitoring price adherence to policy, we increased revenue on these parts by 12% and profit by 6% in 12 months.
I am Ashley J. Swartz. I started my career in manufacturing finance after getting a BS in finance at the world’s largest manufacturer of electronic components, AMP Inc. (now Tyco Electronics). I was an analyst, responsible for revenue forecasting and ultimately building a corporate pricing practice after discovering immense pricing variability and price erosion in our top 100 highest volume, most competitive commodity products.
Competition in our industry was increasing because of new entrants and globalization. Our standard pricing was simply a markup over cost, published once annually. Prices didn’t account for any external factors and were not updated regularly for competition, perceived customer value, changes in cost, end of life, currency exchange, etc. When we began analyzing historical sales data, we found that actual prices were all over the place and varied greatly from a part’s catalog price. And variability was greatest for our high-volume commodity products, which meant our highest revenue products were also our biggest sources of revenue leakage.
The cloud didn’t exist yet, so we used our intranet site to distribute pricing guidelines and discount policies to sales teams, unique to each region. We updated pricing quarterly—4x a year vs. once a year.
When we started to see the economic impact of our pricing policies, I was asked to join the implementation team of our ERP system, which was SAP, to ensure we configured it to accommodate and govern pricing for strategic parts within the contract creation workflow.
The problem was that our ERP system didn’t have tools to calculate optimal and update optimal prices using our sales data or to monitor actual prices vs. recommended optimal prices. And we realized our sales teams were still driving blindly because they had no easy way to get pricing quickly, request changes to price or visibility into the factors that impacted price to provide context with which to more successfully negotiate. When moving out of manufacturing into other sectors like advertising, media and software, although I was selling and making vastly different products, the recurring problems were the same. There was increasing complexity, meaning selling more things, to more customers, in more ways and more places, and our customers were using data and technology to drive down prices. As a seller, pricing was a set-it-and-forget-it process that ultimately ended up being controlled by and determined by the sales organization, which was told to just grow revenue and not trusted with minding profit.
"The definition of insanity is doing the same thing over and over again and expecting a different result.” — Albert Einstein
It was after this realization I founded Furious and decided to tackle the problem of helping media and B2B manufacturers leverage data to empower sales and transform pricing into a competitive advantage.
The valuable lesson learned, time and time again, was that the hardest part of change is winning and aligning the hearts and minds of stakeholders across an organization. This is required to make any change successful and sustainable. This has been the greatest struggle I have experienced myself and with which I have watched our clients struggle in transforming price into a strategic competence and advantage of a company.
Although technological disruption continues to impact every aspect of the B2B manufacturing supply chain, resulting in continuously more efficient production and distribution, how we sell has not really changed that much. All we have done is map and automate the activities of selling; we haven’t actually changed the way we establish value of products and services with customers and come to agreement to do business. It doesn’t matter how well your supply chain is managed if price is the only lever that your sales team pulls on to compete. And we cannot expect pricing execution that is more strategic if sales teams are not provided with intelligence and context to establish greater perceived value and affect a customer’s willingness to pay. Without empowerment of and collaboration with sales teams by the business, the same outcome will always occur: price discounts or matching as a means of winning business, price erosion on your highest demand products, trouble maintaining profit margins and competitors that meet you where you are and go head-to-head on price time and time again.
Sounds insane, doesn’t it?
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