Chemicals Manufacturing
Chemicals companies face increasingly complex pricing challenges due to the destructive pricing practices of “cost plus” and “match the competition”. These policies result in unnecessary discounting, pricing erosion, and quoting below breakeven prices. Improving pricing is one of the most powerful ways to improve business and financial performance for chemicals companies. PROS margin optimization software products drive the highest possible ROI and enable industry leading chemicals companies to achieve Pricing Excellence.
Segmented or differentiated customers, products, and markets, and frequent pricing changes require chemicals companies to understand how to deliver real-time data from multiple sources to sales managers; making sure pricing data incorporates raw material / feedstock costs, seasonality, purchase volume, product mix, frequency, and other factors. It is critical that customer needs are met while remaining profitable on a transaction by transaction basis. Chemicals companies are at a competitive disadvantage if sales, marketing, finance, operations, and management have limited visibility into pocket price and pocket margin, lack a uniform pricing strategy, practice unscientific ad-hoc pricing, and lack relevant and timely data.
Pricing Challenges in the Chemicals Industry
PROS customers in the chemicals industry achieve Pricing Excellence by using PROS science-based pricing software to stop destructive pricing practices. The most successful Industry-leading chemicals companies improve revenues and generate a high ROI by addressing complex pricing problems including:
Lack of visibility into true profitability over time: Sales Managers need adequate negotiation tools providing critical data including cost to serve, willingness to pay, current market climate, customer price history and other relevant benchmarks not currently available in price negotiations.
“One size fits all” pricing: Actionable differences in customer segment purchase behaviors allow pricing based on customer value or product end use creating incremental revenue.
Raw materials & energy costs: Prices change more frequently than ever as chemical companies update prices due to volatile feedstock and energy costs. Manual price updates require significant effort with dependencies on spreadsheets and error prone manual processes. Breaking these limitations simplifies guideline enforcement and improves revenue.
Global competition with narrowing margins: Pricing decisions made based on “gut feel” rather than consideration of relevant data including win-loss tracking and real-time pricing data leads to destructive pricing practices of match the competition and unnecessary discounting. Systematically tracking wins and losses and incorporate feedback into pricing decision improves long-term competitive pricing and improves profitability.
PROS solves the most complex pricing problems, providing a dramatic ROI. PROS chemicals industry experience includes:
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Global competition, cost pressures, and market volatility are changing competitive landscape have leading many chemicals companies to recognize that operating efficiency and market share do not always guarantee profitability. Chemicals companies are shifting focus to include pricing analytics, pricing optimization, pricing execution (deal optimization and contract optimization), and related science-based pricing software as a way of achieving sustainable returns.
Chemicals Industry - Pricing High Value Business Case
Challenge: Sales Managers lack visibility into accurate pricing, cost-to-serve, market or competitive data, and other components needed at the time the deal or contract is made. Lacking accurate data and optimized recommendations, destructive pricing practices of “cost plus” and match the competition” are utilized. No accurate understanding of the pocket price or pocket margin is available and profit leaks and unprofitable deals occur. Without PROS pricing optimization software, products, customers, contracts, and deals which appear profitable may in fact be net negative, loss generating activities.
Solution: PROS Pricing Software provides increased visibility into all pricing terms and cost-to-serve elements during price negotiations including discounts, technical services, freight, handling costs, payments terms, and other costs of goods sold. PROS high performance science-based pricing software products prevent profit leaks by allowing companies to:
- Incorporate future costs in profitability calculations; allowing chemicals companies to factor in the volatility of raw materials and related components
- Derive unique data including pocket price, pocket margin, cost to serve, and other metrics not available in any other system to help create a composite deal score
- Utilize what-if analysis to model the impact of price changes under consideration
- Show relevant market and competitive data at the time of the quote, including the average selling price, market indices, and segment optimized willingness-to-pay
- Evaluate the overall deal attractiveness to facilitate more profitable contract price quotes.
Value: Negative margin transactions are eliminated and customer, product, and deal profitability improves. Additional benefits include product mix improvements and reduced quote response time.
