The 2024 B2B Manufacturers Pricing Report
Amidst an ever-changing macroeconomic climate, full of volatility, 65% of business leaders report feeling more pressure to deliver effective pricing strategies than they did two years ago. 60% of B2B manufacturers report significant margin leakage with the resolve being that manufacturer’s becoming increasingly aware of the importance of pricing and revenue management.
But do manufacturers know what to do and where to look for help as many don’t have internal capabilities to rely on?
- •⅔ of manufacturing business and pricing leaders are under more pressure than ever to deliver on pricing. This is because pricing had widely been understood to be the lever that generates the highest shareholder value and margin growth – Source: McKinsey
- •Manufacturers are relying on a ‘cost-plus’ pricing strategy everyday, with over 50% admitting to that. CEOs will focus on reinventing the company to drive growth and shareholder value but the stark reality is that focusing on pricing, and moving to a value based approach will deliver faster returns and faster reinvention vs. anything else
“CEOs and Pricing leaders are under more pressure
than ever to deliver on pricing”
- •Significant margin leakage is the key pricing challenge. 60% of manufacturers see this problem with a quarter seeing ‘severe leakage’ with few having the internal capability to deal with it efficiently or proactively
- •Almost everyone (92%) understands the potential that pricing brings to growing revenue, increasing profit and achieving financial stability. However, only about half of all manufacturers are able to track pricing metrics to prove the performance they are getting, and only ⅓ would describe themselves as being successful at pricing
- •Technology is the key to unlocking these pricing improvements, yet half of all manufacturers still use technology such as Excel to implement their strategies. Excel is unlikely to be capable of processing the data required with only 10% using dedicated pricing software
- •Almost all businesses are expecting new technology such as AI to completely transform their approach to pricing, but only a quarter expect to use it in the next 12 months. Unless you have a cast iron strategy and processes in place you will never get the rewards you might be expecting. When AI is used, it should be as a support tool rather than a replacement for human intelligence
“AI is expected to transform pricing but
not in it’s current form”
- •Specialised pricing capability isn’t readily available in many organisations, with ¾ of manufacturers reluctant to invest in external support in pricing or organisational capability. A large proportion of businesses admit they do not have the correct organisations in place so maybe not a surprise that ‘cost plus’ pricing is favoured by many although unlikely to deliver the best results
Your next moves:
- •Double down on pricing investments as they are the fastest way to drive profitable growth
- •Don’t be fooled into thinking you need costly internal resources for pricing that take forever to hire. Outsourced to start with to guarantee strong ROI for minimal cost
- •Forget “cost plus” as a pricing model. Go and understanding what customer’s value, and will pay for. Use that knowledge to drive pricing based on willingness to pay and customer segments
- •Reinvent the business with new pricing and business models and minimise slow burn expensive projects like new products, or new routes to market
- •Investigate the efficiencies that can be achieved with AI or software, but only after you have independently confirm your pricing strategy, and processes are fit for the 21st century
