Too few firms know how to price their products

Posted on 21 Sep 2017 by Jonny Williamson

Dr Peter Colman, partner and shareholder at Simon-Kucher & Partners, Strategy & Marketing Consultants, speaks about monetising innovation, better pricing strategies and ‘forensic’ data analysis.

Colman specialises in marketing, pricing and product management topics.

Colman joined Simon-Kucher in 2008 and leads the consultancy’s Technology & Industrials practice for the UK.

He specialises in Commercial Excellence programmes to address strategy, sales & marketing, pricing and product management topics.

Colman has worked for corporate clients, private equity-backed companies and venture capital-backed start-ups across Europe and North America.

Prior to joining Simon-Kucher, he worked for digital marketing and technology consultancies focusing on eCommerce and Customer Relationship Management transformation programmes.

The Manufacturer recently chatted with him about servitization and cost-plus pricing versus value based pricing.

How would you describe the current state of UK manufacturing? 

It is getting renewed attention, certainly from the government, who are trying to bring more balance into the UK sectors.

There are a lot of exciting developments at the moment: be it additive manufacturing, servitization, digitalisation etc. and our focus is how do we make sure that it leads to increased profitability.

We are helping manufacturers focus on commercial topics. What we hear from our client base is that they’ve spent years on operational excellence and tend to be pretty good at that.

But they have not invested in commercial excellence. So, we are helping the manufacturers’ become more professional at pricing and sales.


What would you describe as being challenging or hindering for the future growth of manufacturing businesses? 

The biggest challenge we see is that there are very few firms that have a good handle on how they price their products and services.

On the commercial side, they really don’t have clear, established pricing processes and the sales force tend to struggle when it comes to articulating the value of their offering.

For example, we might help a manufacturer set better list prices, or differentiate their discounts in a smarter way to steer the customer performance or change the inventive plan for the sales force to focus them on more profitable behaviour.

What benefit has automation brought to manufacturing business?

I don’t tend to focus on that from an operational point of view. What is interesting for us is whether manufacturers are intending to pass on any automation cost reduction benefits to their customers via lower prices. That is cost-plus pricing rather than value based price and we would challenge that.

How important is data to your business or to business in general today?

It is extremely important in our client projects. To do pricing well for our clients, we need to use their data (their invoice data), we need to do analysis, we need to be forensic, so that we are not only looking at average margins per product group.

Rather, we are looking at individual prices paid for individual product by a range of customers within a specific sector of the market. We need that insight to come up with the best commercial strategy for each client.