With a global recession dominating the headlines, the value of many commodities falling, and consumer price increases in the United States at razor-thin levels, many manufacturers these days are just hoping to hold the line on the prices they can charge for their products. For many, pulling off an across-the-board increase is almost out of the question.
“With the recession, there’s been a tremendous amount of negative pricing pressure for our various product lines,” says Tom Cull, strategic pricing manager at Hubbell Lighting Inc., a maker of residential and commercial lighting.
Now Hubbell and many manufacturers like it are responding to those downward pricing pressures by attempting to get smarter about how they go about setting, adjusting, and enforcing prices. For many just starting down the path of pricing management and optimization, an important first step is customer base segmentation, a structured look at key customer characteristics that influence how much buyers would be willing to spend for a product.
“Historically, most manufacturers haven’t applied any kind of science to how they price their products,” says James Robbins, senior executive and leader of Accenture’s North American automotive and industrial equipment practice. “Most follow very loosely controlled sales processes. For the most part, they haven’t considered things like segmentation.”