7 cornerstones for implementing successful pricing initiatives in Singapore

The price has more influence on a company's profits than any other factor. Manufacturing companies, as a key pillar of Singapore's economy with almost 25% of the GDP, were very successful in reducing costs in the past but have little experience in optimising their prices.

Thus, money is left on the table in almost every deal due to poor pricing. A recent pricing study conducted by Simon-Kucher & Partners revealed that 85% of companies in the Asia-Pacific region are suffering from strong price pressure. 36% of the respondents were unable to improve their margins in the last few years.

As these figures underline, it is essential for the local businesses to successfully implement profit-boosting pricing initiatives. To do so, smart managers in Singapore need to factor in seven cornerstones:

1. The pricing lever
Devise an approach to boost returns: Successful pricing initiatives run according to plan from day one. This requires first identifying and prioritising the main action areas.

Next, you need to analyse your previously achieved transaction prices and then compare them with industry benchmarks. Based on the results, you can create a customised roadmap with the most important pricing levers.

2. Evolution, not revolution
Take things one step at a time. If you are still setting prices based on intuition or on a cost-plus approach, then you should not jump into, say, a complex pay-per-use model. Many people simply underestimate the implications of this kind of model.

A pay-per-use model in the manufacturing industry involves taking on certain risks, being well acquainted with the legal situation, and a higher financial commitment.

3. C-level involvement
It is the responsibility of C-levels to actively steer the pricing process. In past decades, managers focused strongly on the cost side. Processes were optimised, purchasing professionalised, and the efficiency in production was boosted.

Since then, many company leaders have recognised that the cost side offers little opportunity to improve revenue further. The price as the number one profit lever plays an increasingly important role here.

4. Pricing organisation
It is time to define who is responsible for what. For pricing initiatives to succeed, it is crucial that everyone involved is clear about what their responsibilities are. This includes separating the task of price calculations from price implementation.

If no one feels responsible for pricing, then the sales force will take care of it themselves. In doing so, the achievement of price targets cannot be measured.

5. Mind-set change
Reward margin-boosting behaviour: A major hurdle of every pricing initiative involves changing the mind-set and behaviour of employees. To accomplish this change, it is important to get employees involved early on and to reward positive behaviour accordingly.

If a salesperson sees during a negotiation, for example, that a price cut would negatively affect his or her bonus, this increases price awareness.

6. Simplicity
Get things established before taking the plunge. A sure-fire way towards a failed pricing initiative is to force your team to cope with a highly complex price model.

A price model needs to be transparent and easy to understand for everyone. This doesn't mean falling back onto naive methods such as cost-plus. Intelligent price models, based on strategic company goals, are a good alternative and easier to follow.

7. Repetition
And repeat again and again. Do not ever stop preaching until everyone understands that the new pricing approach is about boosting profits, and not revenue.

Success stories are helpful here. These positive examples should be talked about in regular training seminars. That way, everyone can learn from the best.