Re-designing Pricing Templates for Business Growth

In the competitive Blow and Injection Molding Business, effective pricing strategies are essential for securing orders, maintaining profitability, and achieving sustainable growth. A well-structured pricing template is a roadmap for determining product pricing, ensuring that each transaction contributes positively to the company's financial health. However, many companies struggle with pricing templates that fail to align with their financial realities and lack the sophistication to incorporate advanced pricing concepts like marginal costing. This case study delves into the challenges a manufacturing client faces due to an ineffective pricing template and the transformative impact of implementing a robust pricing strategy.

CFO Bridge, with its experienced CFO partner and chartered accountant, was brought on board to address these challenges and implement strategic solutions to redesign the company's pricing template. The objective was to establish a clear linkage between the pricing template and the company's financials, incorporate the concept of marginal costing, and ultimately improve the company's ability to offer competitive quotes and secure profitable orders. 

Exploring the Disconnect: Why is the Pricing Template Failing the Company?

Keeping a solid market position and guaranteeing corporate success in the fiercely competitive blow and injection molding industry depends on landing major orders. Nevertheless, one of our clients, a manufacturer in this sector, routinely lost important orders to rivals.

Upon closer examination, it became evident that the root of the problem lay in the company's pricing strategy. The sales team relied on a standard pricing template to quote potential customers. This template, while functional, had significant shortcomings:

1. Not Leveraging the Concept of Marginal Costing: The pricing template was uniformly used for all orders, regardless of the customer's specific needs and requirements. This one-size-fits-all approach failed to leverage the concept of marginal costing for new customers or critical orders, resulting in often non-competitive quotes compared to their competitors.
2. Disconnect with Financials: A glaring issue with the pricing template was its need for linkages with the company's financials. This disconnect meant that the quotes provided to customers were only sometimes aligned with the company's financial health and profitability goals.

Recognizing the gravity of the situation, the company turned to CFO Bridge for assistance. The mandate was clear:

• Review the existing pricing template.
• Establish clear linkages between the pricing template and the company's financials.
• Investigate the reasons behind the loss of critical orders to competitors.

The goal was to revamp the pricing template to make the company's quotes more competitive and ensure that the pricing strategy was in sync with the company's overall financial objectives.

How did CFO Bridge help unlock success with metrics?

The strategic interventions implemented by CFO Bridge have resulted in significant improvements in the company's pricing strategy and overall financial health. The metrics achieved are a testament to the success of the solutions implemented:

Competitive Quotes and Winning Orders

• Introducing marginal costing and simplifying overhead allocation have enabled the company to offer competitive quotes tailored to customers' needs. 

• This approach has resulted in the company winning more orders and increasing its market share.

Scientific Discussion of Pricing with Customers

• The company has adopted a more scientific and transparent approach to pricing discussions with its customers.

• Late paymasters are penalized, ensuring the company's cash flow is not adversely affected by delayed payments.

Linkage of Pricing Template with Actual Financials

• The development of standard cost sheets and the inclusion of credit period costs have resulted in a clear linkage between the pricing template and the company's actual financials.

• This approach has provided the company with a clear understanding of its costs and profitability, enabling it to make more informed pricing decisions.

Conclusion 

The case study highlights the transformative impact of CFO Bridge's strategic interventions in revamping the pricing template of a manufacturing client in the Blow and Injection Molding Business. By addressing the critical challenges of uniform pricing, ad-hoc allocation of fixed overheads, exclusion of credit period costs, and variations in raw material prices, CFO Bridge has significantly improved the client's ability to offer competitive quotes, win orders, and ensure that its pricing strategy is in sync with its financial objectives. The metrics achieved, including winning more orders, penalizing late paymasters, and establishing a clear linkage between the pricing template and actual financials, testify to the solutions' success.

Are you facing similar challenges in your business? Do you want to improve your pricing strategy and drive business growth? Contact CFO Bridge today and let our team of experts help you achieve your business goals.