Pricing Challenges in Chemicals
In a highly competitive and cyclical environment, figuring out
the ‘right’ price is one of the most complicated decisions
chemical companies can make. The chemical industry has been
particularly challenged by the increasing volatility of costs,
the challenge of managing both specialty and commodity-type products,
and a culture of sales focused on volume rather than profitability.
Chemicals companies must manage vast quantities of data on complex
contract terms and pricing conditions. But despite the data
volume, many struggle to gain visibility into real customer buying
behavior and market trends. Existing ERP systems are designed
to manage list prices and support discounting processes; but most
chemical companies struggle to leverage these systems to support
the dynamic pricing challenges of today’s environment. Field
sales and product managers are looking for tools to help them battle
commoditization, achieve higher margins and make decisions quickly
based on real-time information.
Research shows that Pricing is the most powerful lever companies
have to affect profits. Marn, Roegner, and Zawada, in their
revolutionary book, The Price Advantage, assert: “Failure
to take real initiative in pricing today virtually assures that
percentage points of price will slip through your hands annually—and
that huge chunks of operating profit will drop off your bottom
line.” For chemicals producers, pricing excellence
has become a competitive imperative as the industry attacks a broad
range of pricing challenges:
- Manual limitations: Updating prices requires heavy
manual effort, with a dependency on complicated Excel spreadsheets
and e-mail and phone rather than a systematic process, which
frequently leads to pricing errors and difficulty enforcing guidelines
- Increasing volatility in costs and prices: Prices are
changed more frequently than ever as chemical companies struggle
to monitor the market and keep up with volatile feedstock
and energy costs
- Segmentation: Lack visibility into actionable differences
in segment purchase behaviors, which means many simply miss the
opportunity to segment prices based on customer value or product
end use
- Negotiation Tools: Sales people don’t have
adequate tools to negotiate confidently with customers. Cost
to serve, willingness to pay, current market climate, customer
price history and other relevant benchmarks are not incorporated
into price negotiations
- Pricing Process: Pricing decisions made based
on “gut feel” rather than consideration of relevant
data
- Win-Loss Tracking: Lack robust ability to systematically
track wins and losses and incorporate feedback into pricing decisions.
Market volatility and the changing competitive landscape have
led many companies to recognize that operating efficiency and market
share do not always guarantee profitability. More and more,
chemicals producers are shifting their focus to include pricing
and price management software as a way of achieving sustainable
returns.
PROS Pricing Solutions for Industrial Chemical Manufacturing
To meet the many pricing challenges across the chemicals disciplines,
PROS provides a comprehensive suite of price management software,
including Analytics, Execution, and Optimization. These solutions
drive high value in chemicals in many different ways:
With PROS Pricing
Analytics tools, decision
makers can:
- Identify and correct destructive pricing trends
- Locate and correct poorly performing customers and
segments
- Drill down to identify root causes of poor
pricing performance
- Evaluate and quantify pricing improvement opportunities
- Understand demand behavior across segments
- Monitor market dynamics and pricing performance
to enable faster response to problems and opportunities
With PROS Pricing
Execution tools, decision makers
can:
- Segment prices and execute them quickly in
the marketplace based on pricing strategy
- Set up more profitable pricing and discount guidelines based
on defined pricing strategies
- Provide decision support tools to the field
to support better price negotiations. Visibility of key
deal terms, customer sensitivities, and market context
- Enforce pricing guidelines by systematically managing pricing exceptions and
approvals
- Eliminate pricing errors by ensuring that
negotiated prices are communicated correctly to ERP systems
- Use rationality rules to eliminate irrational pricing
- Improve time-to-market of price changes
With PROS Pricing
Optimization tools,
decision makers can:
- Optimize price points based on best available
inputs, including forecasts, business rules, and constraints
- Use advanced analytics to guide better pricing decisions, considering price-demand
relationships, including zones of indifference
- Use price-testing to capture price elasticities
across business segments
- Minimize pricing mistakes by evaluating what-if scenarios
- Better forecasts to improve optimization results
- Automate price optimization routines for massive
data sets
Proven Results
PROS customers have reported hundreds of millions of dollars of
incremental revenues and profits from the use of PROS Pricing Analytics,
Execution, and Optimization tools. By eliminating profit
leaks, uncovering hidden price improvement opportunities, providing
sales people with better negotiation tools, and optimizing prices
across segments, PROS customers have been able to leverage the
power of pricing.
To learn more about the opportunities to achieve
Pricing Excellence, please contact info@prospricing.com or
call our sales team at +1 713-335-5277.
Industrial
Manufacturing | Chemicals | Petroleum | High-tech
Manufacturing
