Building Materials

Building Materials companies have moved from commoditised offers sold on a spot market to become critical players in the supply chain solution for commercial and residential construction. Now more than ever, this sector has the challenge of defining value, communicating value and capturing value to ensure an adequate return on assets.

The Building Materials industry today is characterised by;

• shrinking margins
• low cost substitute products
• growing power of the wholesale intermediaries and major accounts and
• overcapacities at all points through the supply chain

Price is often cited as the primary driver to make the sale. In many cases the pressure to deliver sales results drives;

• excessive discounting,
• channel conflict,
• poor signalling for market pricing management leading to market price pressure.

The key challenge is to optimise sales volumes achieved versus an "economic margin." This optimisation can be done via ;

• product and customer segmentation
• development of effective pricing management tools to economically model Total Invoice Costs and Total Value Acquired for each key customer.
  

Total Invoice Cost and Total Value Acquired are key strategies to support the objectives of defining value, communicating value and capturing value.

Implementing change in an organisation where pricing is traditionally managed on an ad-hoc or tactical only basis requires a structured and complete solution. In many companies, the supply chain capability dictates the pricing strategy. The cost to serve smaller customers makes direct dealings prohibitive.

Channel Management

Multiple channels to market are a necessity to maintain the scale to drive low cost factory product and reduce supply chain costs. Wholesalers, Independent Building Supply chains, Major Chains and Value Add Manufacturers are important channels to market for the building materials manufacturers.

This multi channel strategy,requires careful attention to pricing structures and policies and procedures to protect margins. Centralised management of the price across this customer base is a key strategy for companies to grow revenues and expand margins to operationally sustainable levels. In managing the channel, the importance of customer-specific net prices, volume based rebates, short term incentives or order by order "specials" becomes critical.

If your business has:

• "unofficial" price lists,
• spot discounts greater than 1.5% to gross sales, and
• large variances in net prices

Where there is no clear and concise pricing and discount policy, there is often an unstructured go to market situation. The challenge lies in developing a consultative approach with key personnel to generate an effective and sustainable pricing solution. Often bureaucratic rules and polices are set up which causes conflict within the sales and marketing teams or worse, cause the company to lose otherwise profitable business.

Today, more than ever before, Fortune 500 and ASX 200 companies are placing added emphasis on the management of pricing and the implementation of clear price and discount guidelines.

How we work with you and your team

Pricing Insight uses a structured approach to all business assignments. The approach follows an 8 step plan of engagement starting with a stakeholder interview,a diagnostic evaluation, identification of key pricing issues, an initial report and proposal, a workshop and or consulting assignment with key recommendations and actions, the publication of an implementation plan and a post review of the project implementation.

No two assignments are the same, but the established framework and structured approach to deliver solutions provides you with confidence in a proven methodolgy.

We help you develop

Pricing strategy initiatives pricing policies,tactics and processes to monitor, report and control price realisation. Pricing Insight also develops sophisticated modelling and calculation tools that enable detailed pricing econometrics to be performed at a customer and product level. These tools support detailed customer evaluation of changes in to price, volume, product mix, costs, net profit after rebates and discount structures.

Our recommendations are based on empirical evidence and validated through company internal data, market information and expert knowledge. Pricing management change is achieved via engagement of marketing,sales, finance and operations.

Experiences from dozens of projects show that optimised price and discount systems can improve profit margin by 0.5 to 3.0 percentage points of margin on like for like volumes.

Implement Pricing Control Systems

Develop price systems that support regional, national and international prices according to defined rules. An effective price architecture offers flexibility to price product ranges accounting for differences between core, side and complementary products.

Development of Discount Management Systems

Price structures are developed using a number of pricing mechanics including:

• List Price less % discount
• Long Term Incentive rebates,
• Special project/contract pricing
• Exclusive customer pricing and specials management

Pricing Market Management

Poor pricing practices contribute to downward pressure on margins when all player believe that price discounting is the best way to build sustainable business models. The development of appropriate price rise communication, supporting tactics prior to taking a price rise and market communication can all generate a set of conditions favourable to rational market behaviour that does not endanger profits.

Contact us to evaluate your Margin Expansion potential.

Contact us:

Ph: +61 2 9973 4099
Email: action@pricinginsight.com.au
Level 14, 2 Bulletin Place
Sydney NSW 2000 Australia