Leveraging price waterfall against the industry average
In the competitive landscape of the business world, companies are constantly seeking ways to gain a competitive edge. One effective strategy is to leverage the price waterfall against industry averages. By understanding and manipulating the various components of the price waterfall, businesses can position themselves strategically and achieve a sustainable advantage over their peers.
By analyzing the price waterfall components and comparing them to industry averages, you can identify areas where they can make strategic adjustments to gain a competitive advantage. This is where Plasma comes into play, as it combines a massive amount of anonymized and aggregated transaction and quoting​ data into 20+ pricing performance benchmarks, delivered in intuitive visual outputs. You will clearly see where you are not performing at the best you could.
In this scenario, the specific aspect of the price waterfall that holds significant potential for our example company is freight charges. Shipping costs play a crucial role in determining the final price of a product, especially for businesses involved in the transportation of goods. By undercharging freight by -10% against their peers, the company can offer a more competitive price to customers, potentially attracting more business and increasing market share.
However, undercharging freight by -10% should be a carefully calculated decision. While it may seem like a straightforward strategy to gain a competitive advantage, you must consider the potential impacts it may have on profitability and long-term sustainability. Undercharging freight can lead to reduced profit margins, especially if the costs of transportation remain constant or increase over time. It is crucial to evaluate the financial implications and ensure that the overall profitability of the business is not compromised.
By understanding the dynamics of the price waterfall and making strategic adjustments, you can position your business strategically and thrive in a competitive market.
There are a few points to consider, in order to leverage the prices.
Are you using the right metrics to calculate the costs?
Is the promoted freight used as an additional discount mechanism?
Are the sales incentives misaligned with the price waterfall components?
After considering these points along with the calculations provided in Plasma, you can adjust your strategies and realize that you can close the 400 bps industry gap by addressing the unreimbursed freight.