Market Based Pricing

Introduction

  • Justin Kanapask introduces himself as Director of Industry Solutions at Synchron.

  • Joined by Kim Long and Tim Guyer for a discussion on market-based pricing.

  • Discussion focuses on enhancing aftermarket pricing strategies.

Participants Introduction

Kim Long

  • Global Director of Value Engineering at Synchron.

  • Synchron focuses on solutions for aftermarket providers, connecting inventory, price, and service delivery.

  • Key offering: Synchron Price – end-to-end pricing solution including analytics, price setting, management, and execution.

    • Key features:

      • Competitive data management and analytics module.

      • Unique price curve optimization for modeling price changes.

Tim Guyer

  • Leads Market Pilot in North America.

  • Focuses on helping OEMs drive parts business growth through informed pricing decisions using market data.

  • Advocates for integrating market data into pricing strategy as essential for success.

Market-Based Pricing Overview

  • Market-based pricing involves using competitive market data to set prices.

  • Changes in the market environment:

    • Increased competition from third-party vendors.

    • Consumers have abundant options for parts purchases.

    • Pricing strategy must align with market trends to maintain competitive advantage.

  • Importance of market-based pricing:

    • Helps manage customer relationships and maintain brand image.

    • Essential for effective pricing in the aftermarket space.

Feedback Mechanism in Pricing Strategy

Customer Feedback Importance

  • Informed pricing adjustments require real-time competitive insights.

  • Utilizing a feedback module enables suppliers to receive competitive pricing data for parts.

  • Relevant factors include:

    • List and net prices.

    • Variations based on order quantities.

    • Direct feedback mechanisms improve competitive pricing alignment.

Managing Large SKU Lists

  • Importance of prioritization in tackling competitive pricing challenges.

  • Suggestion to start with a smaller, manageable subset of SKUs when implementing market-based pricing.

    • Focus on:

      • High-volume items that have significant profit margins.

      • Items with low win rates or conversion rates.

  • Study of 161 OEMs revealed:

    • Only 4% of parts were priced at market standards.

    • 96% were found to be overpriced, underpriced, or incorrectly categorized.

Pricing Update Frequency

  • Shifted from quarterly updates to more frequent adjustments due to market dynamics.

  • Organizations increasingly update pricing to stay aligned with market conditions.

  • Insights indicate that more than 75% of parts prices have changed by at least 10% in recent quarters.

Product Differentiation as a Factor

  • Understanding product quality and brand strength affects pricing decisions.

  • Consumers evaluate value based not only on price but also on perceived quality and brand reputation.

Challenges and Dynamics of Market-Based Pricing

  • Post-COVID-19 environment has introduced complexities in pricing strategies.

  • Adjustments must account for inflation, pricing sensitivity, and competitive reactions.

  • Transparency in pricing changes is vital to maintain customer trust.

Skills Required for Market-Based Pricing Analysis

  • Three-step process for effective market-based pricing:

    1. Select parts strategically for market data analysis.

    2. Choose reliable partners for market data collection and analysis.

    3. Integrate data into broader pricing strategies and processes.

  • Importance of analytical and communication skills among pricing teams.

E-commerce and Market-Based Pricing

  • E-commerce enhances price comparison for consumers.

  • Companies must ensure that their online pricing aligns with market rates.

  • Quick customer feedback loops and surveys can aid pricing strategies in e-commerce.

Data Quality and Vendor Relationships

  • Crucial to ensure high-quality and accurate data for pricing decisions.

  • Market Pilot emphasizes the accuracy of collected data through a three-step validation process:

    • AI data collection.

    • RFQs to verify online pricing.

    • Human data verification to ensure apples-to-apples comparisons.

Competitive Landscape and Part Ownership

  • Increased competition from third-party parts suppliers has changed the aftermarket dynamics.

  • OEMs must stay aware of market position based on actual parts numbers versus assigned vendor numbers.

Market Data Update Practices

  • Standard practice is to update market data quarterly, with some focusing on key parts monthly.

  • This ensures companies remain competitive and adaptive to market changes.

Total Cost of Ownership (TCO)

  • OEMs must consider TCO in market-based pricing strategies, assessing maintenance costs and overall value.

  • Monitoring competitor pricing impacts TCO, especially for proprietary parts.

Time to Value in Pricing Solutions

Synchron Pricing Solutions

  • Organizations experience immediate efficiency benefits by consolidating pricing data.

  • Quick wins identified through fast adjustments to incorrect pricing practices.

Market Pilot’s Focus on ROI

  • Market Pilot aims for clients to see substantial ROI within six months through effective market pricing strategies.

  • Example of additional profits realized by quick adjustments to pricing of select SKUs.

Closing Thoughts

Kim Long

  • Reiterates the necessity of market-based pricing in pricing strategies.

  • Encourages exploration of market data to enhance pricing strategies and employee engagement.

Tim Guyer

  • Emphasizes the importance of curiosity and connectivity with experts in the field.

  • Highlights that pricing strategies can be dynamic, impactful, and yield significant value.