![]() ![]() Many larger companies with greater resources have implemented digital transformation programs or have plans to do so in the near future. In order for distributors to keep up with the changes, implementing a strong pricing strategy is necessary. At the same time, larger companies are increasingly engaging in centralized buying to save money. Part of this problem comes from the disruptions posed by antiquated computer technology and poor controls when companies consolidate.ĭealing with manual processes and antiquated systems means that many companies replace them with static systems that are ineffective. According to Deloitte, year-over-year top-line revenue growth fell from an average of 16% in 2006 to an anemic 3% in 2015. ![]() These problems can be readily seen by examining data of the year-over-year top-line revenue over the past few decades. You can imagine the impact a rigid legacy IT structure can have on a larger, more complex organization, or how a lack of pricing transparency can limit options trying to find a wholesale distributor for their products. Ultimately, this can reduce profit margins. Some of the smaller consolidated companies bring antiquated manual processes with them, leading the newly formed consolidated companies to expend substantial sums trying to incorporate their data. This can lead to the creation of larger companies that have ineffective controls and poor governance. Mergers and acquisitions are often completed hastily and are not well-researched. This consolidation trend poses issues for both their customers and for the companies themselves. Smaller companies consolidate with larger companies in a drive to gain better profit margins, have access to greater resources, tame competition, and secure a greater market share. ![]() Consolidation has occurred across industries, including the telecom, domestic airline, gas station, and medical device manufacturing sectors. Today, there are closer to 9,200 wineries and only 1,200 wholesale distributors in the U.S. For example, in the wine industry, there were approximately 1,800 wineries and 3,000 wholesale distributors in 1995. Lack of Control, Visibility, Governance, and Relying on Manual ProcessesĪ drive toward consolidation among wholesale distributors has been a key feature across industries in the last two decades. The result? Pricing weaknesses were expected to cost companies. In the study, 49% of the companies engaged in price wars, and 82% complained of increased price pressures due to competition with low-cost providers, increased pricing transparency because of digitalization, and the greater negotiating power of today’s customers. A primary driver of these problems is reactive discounting. According to Simon-Kucher & Partners’ Global Pricing Study 2016, 30% of participating companies failed to enforce pre-planned price increases, and 87% identified a need to improve their overall pricing strategies. Inconsistent Pricing and Reactive DiscountingĪ sound pricing strategy demands accuracy and consistency, yet many companies fail to adequately pass on their cost increases. In the following section, we’ll discuss the top three challenges of developing a winning pricing strategy and how to navigate the process. To stay competitive in the market, many companies are turning to AI-driven solutions to ensure customers are getting the right product offering, at the right price, at the right time. In the midst of these changes, organizations must find a way to normalize the process and come up with pricing strategies that are proactive rather than reactive. When costs fluctuate, businesses tend to react to these fluctuations rather than predicting them. Customers are coming to the table with more information and less loyalty than ever before. ![]() But the inescapable reality is that traditional, low-tech, relationship-based processes are not equipped to meet the expectations of today’s buyers. Challenges of Developing a Winning Price Strategyĭespite the ever-evolving market, most companies still plan for higher annual revenue growth–up to 5%-10% per year. ![]()
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