Unless you’ve been living in a cave for the last few years, with no internet access, you don’t need a crystal ball to predict that manufacturing and distribution company profit margins are going to be squeezed for the near future. With the macro-economic book being re-written in real time, most economists have been spending a lot of time on bar stools. Will CFO’s be soon to join them?
Over the years, manufacturing and distribution companies have had quite a few levers available to address margin challenges. As margins start to slip, the question is which of the many margin improvement levers should be pulled? Many companies have already harvested the low hanging margin improvement fruit. Until recently, procurement and supply chain professionals have been doing an admirable job of trimming costs to the bone. But lately, with ongoing supply chain challenges, climbing labor costs, and inflationary pressures building, some of the previously effective levers have been rendered inoperative. But not all is lost! A powerful pricing lever that could add hundreds of basis points to the bottom line is available and ready to be pulled: Adding AI-enabled deal price guidance to your quoting process.
If you’re a pricing person you probably already understand the potential benefits of going with price guidance. As you embark on this path, the challenge you’ll run into is to show the light to key C-level decision makers in your organization, starting with the CFO.  If your CFO hasn’t started scrambling to figure out how to plug the rapidly-growing margin leakage holes, they soon will be. So, here’s your chance to get to the CFO before they head off to join the economists in the bar. Some thoughts on how to approach conversations around this pricing lever:
Illustrate the Potential Revenue Uplift
We pricing people have known for years that the potential revenue uplift benefit of optimized price guidance can be 100 to over 300 basis points. For a $1 billion per year business that’s ten to thirty million dollars. In most organizations numbers like that will get some attention.
$10-30 million potential revenue uplift with optimized price guidance
Justify with ROI
CFO’s live and breathe return on investment. No project investment of any size gets funded without a business case based on a solid return on investment estimate. When your CFO starts looking at investment alternatives to strengthen the bottom line, a solid ROI with quick time to value will be a must have. The potential uplift from optimized price guidance has been repeatedly proven. This is an investment that can be justified and can stack up favorably against other initiatives.
Assign a Champion and Gain Sales Buy-In
Who really ‘owns’ pricing? That depends on who you talk to, but in most companies the sales organization needs to be brought on board to make a price guidance initiative become reality. Check out this blog for some ideas for getting your price optimization project moving.
Get Started Now and Be Up and Running in a Few Short Months
Time is money, and the timing has never been better to put an optimized price guidance solution in place. Depending on the complexity of your integration requirements, you could be up and running and generating value in a few short months.
For more than 20 years, Vendavo has helped more than 200 companies add billions of dollars to their bottom lines with our AI-embedded solutions designed to optimize pricing and profits. We provide you with pricing levers that are going to make you money. We have real-world customer success stories to prove it. We’ll assist you in building your business case. You’re not alone on your margin improvement quest, Vendavo is with you every step of the way. Here’s your chance to rescue your CFO from the bar.Â
I’d like to schedule some time to discuss an idea that can add 10 to 30 basis points to our bottom line.”
You to your cfo