Material Cost Increases Can Squeeze Your Business

Material CostNo matter how large or small your business is, material cost increases can put the squeeze on you. Raising prices to recoup profits, is often the last resort. Chances are good that your sales people hate the idea and your customers are not fond of it either. After all, when you’re dealing with falling margins the prospect of losing customers to a price increase just adds to the pain. But without an increase, your business will undoubtedly suffer.

The Real Problem Is Uncertainty About Customer response

It’s hard to know what’s really going to happen once a price increase goes live. Is it too much? Is it too little? What’s the right balance that will stop the margin erosion without hurting the revenue stream? With no time or tools to do a deep, fine-grained analysis, most companies take the approach of a uniform price increase.

The Die Is Cast Once You Roll Out A Price Increase

The problem with a uniform price increase is that it assumes everyone will react the same way. The reality is that some customers will absorb the change without noticing. Other customers will actively negotiate the change downward. Some will simply take their business to a competitor. Wouldn’t it be better to know how each customer will respond before you roll out an increase?

Tailor Your Price Increases To Each Transaction

The most effective way to make the price increase stick is to finely tune prices for every customer in your business, tailoring them to each product on each order. Optimal price changes may span the range from several times higher than your targeted increase, to some that are well below it — maybe even some price decreases.

MarginMax Knows How Customers Will Respond To Price

Most companies don’t have the means by which to create the millions of custom price points required by this approach. Zilliant MarginMax has this power built in, and it’s proven in dozens of industries. It allows companies to be surgical in their approach to rolling out price increases, by accounting for how sensitive each customer is to price.

 

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