North American Coal Corporation's Materials Handling Division

NACCO Material Handling Asia Pacific wholesaled materials handling equipment into the Australian domestic market, Pacific Islands and the South East Asian markets.

Forklifts from $2,000 AUD up to $500,000 AUD were marketed to all types of customers via a dealership network that was company owned in Australia and independently owned in New Zealand and South East Asia and Islands regions. Forklifts were considered by the sales force as commodity products, deep discounting was common, and selling on being the cheapest in the market was standard practice.

Marketing equipment with gross margins of between 5 and 35% is difficult. The challenge is compounded by volatile exchange rates, desperate competitors, lack of brand loyalty and the perception amongst sales staff that their brand was a commodity. Other risk factors involved having visibility of the right cost information.

Since many units sold had add on attachments, the end sell price of a forklift could cost an additional 20% more than the basic unit. This type of variable expense, if not calculated correctly on a 50-100 unit deal could mean the difference between making 10% gross margin and losing $50,000-80,000 AUD on a large tender.

The secondary consideration was the often inflexible pricing structures and rules which often gave away too much margin in some cases and in others did not set the pricing correctly to develop a winning tender because of the fear of setting prices below costs.

All of the above factors were addressed via centralized pricing management control.

 A number of tools were developed to deliver high speed quoting, accurate costings and allowed bundled margin analysis for large tenders. In addition centralized pricing management allowed a high quality database to be kept on all deals, thus pricing intelligence was highly concentrated in the place where it was needed most – the pricing manager's computer.

Working with the General Manager of Sales and Marketing and alongside the Managing Director, pricing management changes were implemented over the space of 18 months to deliver a sustainable pricing management process and policy.

In hard financial terms, the company's profitability moved from a -$100,000 loss to a $3,000,000 profit in 2 years on identical revenues.

These results seem hard to believe but sophisticated pricing management in a low margin environment will always provide management with a win, and in fact low margin industries shave the most to gain form implementing a pricing management program.

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