Is Your Pricing Strategy Costing You Significant Profits?

Multiple studies have documented that one of the most important ways for companies to improve their profitability, market share and competitiveness is to implement more effective pricing practices.

However, while pricing has been identified as an important tool for senior executives to improve their company's profitability, pricing is not very well managed in many organizations today.  

It is vital that everyone who's involved in pricing and selling your products or services understands and supports the pricing strategy the company has in place.

But we found many companies have a pricing strategy that evolved over time resulting in a very unclear and confusing company strategy. Such "evolved" pricing strategies are often undocumented, unrelated and unresponsive to the organization’s current overall business objectives.

In this situation there is usually an opportunity for significant profit improvement. Investing in the development of a clear pricing strategy can be the foundation for greater profitability, increase or defend market shares, and enhance revenues.

It's quite common for us to hear during our pricing assessment project interviews that the present undocumented process is in place because "that's the way we've always done it".  It is rare to see an integrated strategy based on sound principles that are tied to today's economic conditions.

These Profit Improvement Opportunity Assessment projects are an excellent way to identify the key leverage points in your business where changes to your pricing practices can give you the best results in the least amount of time. In this process we can quickly identify the best opportunities in your company to improve profits with smarter pricing practices.

The Opportunity Assessment process is designed to identify revenue and profit leakages.

Depending on the size and complexity of your business, Opportunity Assessment projects usually last for two to eight weeks. They include interviewing your key employees and business partners involved in the process using a combination of one-on-one interviews and workshop sessions. There is also a need to perform some analyze of historical data to identify potential profit improvement opportunities.  

Current procedures should be reviewed; potential opportunities are then documented; and the gaps between actual pricing practices and your company policy as well as best practices are then identified.

We would be happy to answer any questions or further discuss this or any other area of profit improvement where we might be able to be of assistance. Please feel free to contact us.

Joe Bonocore

jbonocore@bonocore.com

Increasing Profits: Improve Indirect Spend Management

A number of world-class operating organizations in a variety of industries recognize that improving their indirect spend management was a significant source for increasing profits.

Based on various studies, performance differentials in indirect spend between Best Practice and Average Performing Companies include:

1. 12%- 18%  lower material and service purchase price; 
2.   60% few part numbers;
3.   3x the inventory turn; and
4. ½ the internal transaction cost.

The opportunity for these saving exists in a wide variety of industries including communications, utilities, high technology, consumer products, manufacturing, construction, automotive, oil & gas, government, and other process industries.

The typical indirect spend situation in the client that indicates that there could be a significant opportunity for savings includes:

  

1. Inadequate sourcing strategy coverage across entire spend;
2. Current negotiated pricing not competitive
3.  Low compliance of preferred contracts; 
4. High percentage of spot buys and no disciplined spot buy process;
5. Inconsistent inventory management processes across sites with inventory turns <1
6.   Proliferation of systems, with no visibility across systems;
7. Proliferation of suppliers; and 
8. Inventory managed in multiple locations.

Some companies have increasingly used outsourcing of indirect procurement as a new and enhanced opportunity to reduce cost and increase efficiency.

1.    Outsourcing of non-core processes is a strategic trend

  

1. Allows more focus on core processes and reduces management effort
2. Reduces cost by shifting management to industry leader with scale and expertis
3.    Optimizes/minimizes investment in technology and assets

2.    Outsourcing of indirect procurement has been a relatively new and promising service offering for top operating companies

1.   Indirect spend management typically receives low priority on the procurement agenda and is under-invested in 
2.   The promise of B2B has proven difficult to achieve 
3. Top operating companies are looking for someone to manage this spend while they closely manage 1 entity instead of thousands

Current Stated Reasons for Outsourcing from Our Clients:

1. Reduce Costs (estimates generally are a savings of 15%- 20% of Total Cost of Ownership of Indirect Procurement Cost over a 2-4 year period). 
2.   Increased focus on core competencies to drive shareholder value (eliminate non-strategic processes) 
3. Tight labor markets
4. Need for workforce flexibility 
5. Fast paced changes in technology and significant upfront infrastructure costs to take advantage of new technologi 
6. Supplier consolidation efforts 
7. Emergence of organizations that can provide a wider range of services and stronger value proposition than indirect-related outsourcing organizations in the past

Is this an opportunity for you to save money? Is outsourcing or an internal approach the answer?

Please feel free to contact us if you would like to discuss this or any other opportunity to reduce cost or increase revenue in your company. We look forward to helping you in any way we can

Joe Bonocore

jbonocore@bonocore.com

Continuous Improvement: Need for Six Sigma Skills

Has your company been taking advantage of Lean Six Sigma Techniques as a way to restructure your operations; improve your profitability; and stay competitive?

Now many companies are realizing the need for implementing Lean Six Sigma Techniques on a continuous basis in their company. This now requires they hire and train internal staff in Lean Six Sigma techniques and how they apply to their business.  

Bonocore Technology Partners, a Disabled Veteran Business Enterprise, is very experienced in helping our clients implement in-house Lean Six Sigma Performance Improvement Programs. Our staff has led many efforts in this area which have yielded significant bottom line results. 

Our first step in helping our clients implement their own effective internal Lean Six Sigma Program is to train a select number of company employees to receive Green Belts in Lean Six Sigma (LSS). When certified, they can act as project managers on LSS projects. 

To receive a Green Belt, a candidate must:

1. Attend approved LSS training conducted by Black belts, Master
Black belts and/or other qualified instructors. This will be the content
we can cover in the first 6 days of our tailored LCC training conducted by our Black Belts.

2. Pass an examination that covers this material, administered by a
Black Belt or Master Black Belt. We would administer this examination on the morning of day 7.

3. Design a project approved by a Black Belt, Master Black Belt, or
other qualified personnel, and completed at work in a satisfactory fashion
and in accordance with the Six Sigma principles covered in the course. We will complete the initial design projects on the afternoon of day 7.

 

The final step in Green Belt Certification is: 

4. Successful completion of the projects approved by and under the
oversight of a Black Belt or Master Black Belt, and/or other qualified
personnel in conformance with the processes taught in the 4 day course.
A successful project will produce results that will be rigorously measured by the team itself as well as the Black Belt or Master Black Belt monitor.

Typical metrics include measurable cost savings, operational improvements, quality enhancements, safety improvements or other related metrics as approved by the monitoring Black Belt or Master Black Belt as targeted in the project design completed on day 7.

If the client wishes to have the process completely in-house, we can also train client staff to be certified as Black Belts so that you would not have to rely on our team for the training and the oversight. 

The need for an in-house LSS team will become more and more critical as the pace of change continues to quicken and the cost of not changing fast enough becomes higher and higher.

Please feel free to contact me if you would like to discuss this or any other topic further

Joe Bonocore

jbonocore@bonocore.com

Greater Profits: Correct Sales & Marketing Practices

Growing your business doesn't have to be as complex or expensive as many companies make it. Over the next few months, I will give you some very simple, cost-effective ideas that are designed to help you increase your revenue and profit, without busting your budget. 

The first four are in sales & marketing:

1.       Focus on helping your client, instead of selling to them. Salespeople shouldn't try to force people into purchasing their product or service. They should find people who need their product or service and offer any helpful information to them so they can make an informed decision.

2. Target those that may need your product/service. If you're trying to target everybody, then chances are you're not targeting anybody. For example, if you're selling something that private colleges & universities would want, as opposed to state universities, then target private colleges & universities. State your target clearly in all of your marketing materials.

3. Stop spending money on ineffective marketing. One great way to save money is to stop wasting it on marketing and advertising that isn't producing for you.  Monitor the number of responses you are getting from each of the methods you use. If you're not reaching your goals, then your strategy needs to be changed.

4. An organized networking program should be a key component of any marketing strategy. Networking is a great way to get your message out to a large number of people. Since executive in the company may know hundreds of other people, you can spread the word about your business pretty quickly. The team can go to your local Chamber of Commerce meetings. Shake hands at business functions. Exchange business cards with associates they see in stores, churches and community events.

We would be happy to answer any questions for you or help you improve this or any other part of your business.

Joe Bonocore

jbonocore@bonocore.com

Machine2Machine Solutions: Next Decade High Revenue Growth Area

Does your Business Plan include a plan to significantly and effectively increase your M2M service revenue? 

After years of anticipation, the machine-to-machine (M2M) era may have finally arrived. 

A recent Yankee Group forecast predicted that enterprise cellular M2M connections worldwide

will surge from 81.8 million in 2011 to nearly 217.5 million in 2015. In the same time

period, connectivity revenue will more than double from U.S. $3.1 billion to $6.7 billion.

Yankee notes that this will “make the M2M market one of the highest growth areas in the

wireless arena during the next decade”.

 

This growth is being driven by many organizations who desire to cut cost and more effectively manage their assets as well as the expansion of a number of new applications such as the smart meter in utilities.

Are you prepared to take advantage of this opportunity? 

Our firm has significant experience and completed comprehensive research on ways to effectively capitalize on this opportunity. This includes market segmentation; service identification, design & prioritization; options for organizing & managing to effectively attack the market; and implementing these services.

We would be happy to discuss this opportunity with you and help you in any way we can. Please feel free to contact me

Joe Bonocore

jbonocore@bonocore.com