Commodity pricing

Providing customers with a fast pricing proposal is key to grow your business in a productive manner.

Yet, there is a major difference between providing customers with your price quote between “commodity” products and “proprietary” products.

Commodity products (catalog) pricing highly depends on market pricing, your internal cost and … capacity situation. Competition is typically very strong here.

Proprietary products pricing is a different story … value add functions or product specifics highly impact pricing customers will be ready to pay … you are far less impacted by competition while your value-add may even touch customer development cycle and / or end product production cost. This is where your intelligence, so time needed, comes in.

Key thing is to first position your product … DO NOT just believe your product is high value add without really understanding the customer thoughts on this.

Considering the above, your approach and organization needed will be completely different depending on the product sold :

You will likely need a good product marketing organization to optimize market share and internal margins for proprietary products.

You will need a good toolset for the commodity products … sales teams should be able to perform very fast price quotes to the market aligned to internal costs and capacity situation … call it “optimized capacity selling” if you like.

Some of the ingredients a good commodity toolset would need :

  • Support a global pricing policy
  • Should put your company immediately in a better competitive position in terms of market response.
  • Allow human resources to spent time looking at 15% of quote activity that represents probably like 75% of the business value.
  • Support a single source of global price information.Capable to calculate a price proposal enabling 85% of your customers RFQ’s to be responded to.
  • Create a price versus volume curve.
  • Allow a percentage variation of price curves depending on competition, region, etc.
  • Allow framing of devices i.e. a core device having dependents attached which will follow the master.
  • Allow regular or schedule uploads to ERP or other main systems.
  • Improve Quality (consistency, paperless, less manual interventions).