{"id":61740,"date":"2021-03-17T16:17:57","date_gmt":"2021-03-17T15:17:57","guid":{"rendered":"https:\/\/www.fup-ag.com\/hebelwirkung-des-preises\/"},"modified":"2024-10-31T16:13:53","modified_gmt":"2024-10-31T15:13:53","slug":"leverage-effect-of-price","status":"publish","type":"blog","link":"https:\/\/www.fup-ag.com\/en\/blog\/leverage-effect-of-price\/","title":{"rendered":"Using the leverage effect of price correctly – living price management"},"content":{"rendered":"
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Using the leverage effect of the price correctly<\/span>Living price management<\/span><\/h1><\/div>\n <\/div>\n\n\n
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F&P Blog<\/span><\/h2>

One difference between the very successful companies and the less successful ones lies in the correct understanding and implementation of price management. Many companies or their management are afraid to adjust their prices to inflation or slightly above it. At the same time, however, they are annoyed by declining profitability over the years.<\/p>

What is the fear factor of price increases in the B2B and B2G sector?<\/strong><\/h3>

It’s always the same reason: “We risk losing customers to the competition by increasing prices.” This is the unanimous opinion of many of my customers in the industry. Two comments on this:<\/p>

  1. No relevant customers are lost as a result of justified price adjustments that are demanded due to understandable price increases in the market environment. In my experience, customers with very low contribution margins are always the ones who are most likely to leave and look for the next cheapest option. Let them go! <\/li>
  2. A price increase will inevitably bring you into conversation with the customer – this just needs to be used correctly. Appropriate preparation for the discussions is essential for this. Once this “homework” has been completed in detail, it leads to a deepening of the customer contact and significantly to a better understanding of the customer and their economic environment. <\/li><\/ol> <\/div>\n <\/div>\n\n\n\n\n
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    Why price increases are more important<\/span>as cost-cutting measures<\/span><\/h2>

    Price is the number one lever for influencing a company’s earning power in a cost-neutral manner. For manufacturing companies, a 1% increase in the sales price has a leverage effect of between 11-15% on earnings. In other words, an EBIT increase of 11-15%. No cost-cutting measure can even come close to achieving this, as the chart below illustrates.
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    What exactly is price management?<\/strong><\/p>


    The term price management refers to a highly analytical and strategic task relating to the business model in the corresponding competitive environment. Once the company’s own positioning in the market, with its strengths and weaknesses and USPs (unique selling propositions), has been updated and clarified, the actual technical part begins. Price management is not rocket science, nothing completely new or innovative, but solid craftsmanship that builds on a wealth of experience.<\/p>

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    Why is this instrument treated so neglected?<\/strong><\/p>

    In my experience, the main reason for this is uncertainty when dealing with prices. The fear of losing orders, sales and customers to the competition prevails when dealing with price increases. These fears outweigh the great opportunities to increase profitability in small, steady steps over the years. Cost-cutting programs are used to counteract price increases in order to avoid losing customers due to declining performance.<\/p>

    However, this concern is unfounded if the management takes a detailed and up-to-date look at the market and customer needs. If possible, a price adjustment should be accompanied by additional services from which the majority of customers also derive added value.<\/p>

    Let us give you expert advice – we have already successfully implemented many pricing projects without losing relevant customers.<\/strong><\/h3> <\/div>\n <\/div>\n\n","protected":false},"excerpt":{"rendered":"
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    Using the leverage effect of the price correctly<\/span>Living price management<\/span><\/h2>\n<\/div><\/div>\n

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