October 2019 - Margin Hound

By Product Pricing – Treasure From Trash!

October 12, 2019October 12, 2019 by MarginHound

Many manufacturing processes, especially in basic industries, produce more than one output. For example, chemical plants often produce a basket of chemicals. This is a result of breaking chemical compounds into smaller molecules. These other products are called byproducts. And by-product pricing strategies can have a significant impact on your profitability.

Two common cases: food waste and recyclable scrap. Food waste can be fed to animals. Many cutting and shaping processes produce scrap. Scrap can often be put back into the machine that created the original roll of material. In the paper industry, we call scrap “broke”. Our broke went back into the paper mill, saving us money on fiber.

When To Use Competitor Oriented Pricing

October 12, 2019October 12, 2019 by MarginHound

A competitor oriented pricing objective sets prices in response to competitor pricing decisions. This type of pricing strategy is common in hierarchical markets, where there is a good / better / best ranking of potential products. It is also common in highly transparent commodity markets. Both situations require you to carefully manage your risk of losing volume due to price.

Turnaround Strategy: Survival Pricing

October 12, 2019October 12, 2019 by MarginHound

You may safely assume that if I am in your conference room, I’m not there to hand out the Jack Welch award for business excellence. I specialize in turnaround management. Specifically the commercial parts. This includes managing pricing. Call it survival pricing.

Most of the rest of the articles on the internet don’t do this topic justice. Here’s the real deal.

In a survival situation, every price has purpose. We have few moves, so we use them wisely.

Here’s why I gave you that price….

When To Use Sales Oriented Pricing

October 12, 2019October 12, 2019 by MarginHound

A sales oriented pricing objective uses pricing to facilitate sales and market share growth. The goal is to use pricing as a tool to help drive “smart growth”. Thus, companies using this strategy will discount prices where it is likely to create growth. However, sales oriented doesn’t necessarily mean sales driven: they will likely stand firm on price elsewhere.

While margin improvement is a common pricing goal, there are certain situations where a sales oriented approach makes a lot of sense. We are going to explore a few of these.

Career Paths: What Does A Pricing Analyst Do?

October 12, 2019October 12, 2019 by MarginHound

The role of a pricing analyst varies between companies although there are a couple of fairly common “archetypes” that a job applicant can use to understand what they are getting into. While these are all technically “pricing jobs”, the specific requirements of the role can vary notably and may require a candidate to gain additional experience outside the pricing team.

Laziness & Procrastination: It Isn’t A Fault, It’s a Strategy

October 4, 2019October 4, 2019 by MarginHound

We live in an 80 / 20 world. In most major areas of economic life, it is a fact that 80 percent of the value is created by 20 percent of the participants. Most startups fail, a few make billions. Most products fail, a few become block busters. This can be applied within a business all the way down to the order and line line. A few customers, a few orders, a few products… a few opportunities create most of the value.

In fact, this trend is only accelerating as digitization advances. We’re seeing an even more intense form of the 80 / 20 allocation in the form of winner take most markets. Google’s organic search results are a great example of this. We’re going to rank every website that is possibly related to your term and show them in order. First gets 60% of the clicks, next gets about 25%, third place around 10%, bottom of the first page gets 1%. Anything after that is consigned to oblivion. That’s not an 80/20, that is closer to a 64 / 4 or a 51 / 1. A brutal second or third derivative of the 80 / 20 concept.

It’s not just Google. The same dynamic applies on Amazon. Or LinkedIn and Monster.com. Facebook. Tinder and dating sites. Any place in the economy where infinite players can compete for a finite resource. Like Highlander, there can be only 1 (top result).

This doesn’t just affect companies. It affects your career and social partnerships.