Construction

Challenges in the construction and HVAC industry

Today’s construction industry is characterised by declining markets, product abundance growing power of the intermediaries, the increased use of private labels and overcapacities on all levels of the value chain. As a result prices are increasingly used as a buying incentive.

In these situations, the importance of customer-specific net prices, rebates, bonuses and reimbursements increases with the result that crowding out and price competition prevails. “Moonshine” price lists, inflationary discounts, cash backs and large variances in net prices become more prevalent. The price and discount policy is no longer comprehensible and consequently the market experiences a lack of price orientation and price confidence.

Acting against these circumstances is not easy, especially in multi-level distribution systems where the suppliers do not have direct impact on the price setting for the decision maker’s side (decision makers being the planners, architects, property developers and craftsmen). Through commanding a more active role in the project business the intermediates augment their control over price sovereignty. To effectively combat this dynamic intelligent internal steering of pricing is required. In many cases too much price freedom for the sales force coupled with insufficient reward mechanisms leads to little incentives for the sales force to struggle for “better” prices. In many cases, the implementation of higher prices in the market is also hindered by special agreements with customers.

Due to this situation and insufficient profitability, more and more companies are placing added emphasis on the consequent management of prices and the implementation of clear price and discount guidelines.

Our Consulting Approaches

Our consulting approaches are specifically tailored to enable companies supplying the construction industry to optimise their price and discount systems. In addition to assisting in realigning and implementing the price strategy our price analyses pinpoints realisations, trends and specifics in the price management and helps to identify price potential within the portfolio. We support the preparation, execution and controlling of price initiatives and price adjustments, design and implementation of processes to monitor, report and control price realisation.

In addition to enhancing price realisation and price process SKP develop simulation models and calculation tools that allow for segment specific as well as individual customer evaluation and forecasting of the consequences of changes in the price and discount structure. Our recommendations are based on empirical evidence and validated through company internal data, market information and expert knowledge. We ensure the implementation through involving the sales force in the quantification and qualification process and through price communication to the market. Experiences from more than 100 projects show that optimised price and discount systems can improve the profit margin by two to five percent points.

Our consulting approaches in detail:

  • Development of price systems:
    We develop price systems that determine regional, national and international prices according to defined rules. The price systems determine the price architecture of the products, accounting for differences between core, side and complementary products. Defined calculation rules allow for consistently differentiated prices.
  • Development of discount systems:
    In discount systems we define the degree of differentiation across customers. Prices are differentiated based on the conscious setting of rebates, reimbursements, budgets and bonuses. The rules of the discount policy are strictly formulated in accordance with the function and performance of the business partner.
  • Implementation of price leader concepts:
    The concept of price leadership differentiates the market players according to size, strength, behaviour and strategy. Considerations towards “natural” market areas and “natural” customers help to define the scope of operations. We coach the price leader in the internal set-up and support in the external price communication.
  • Optimisation of price lists:
    We optimise the price list of our customers by developing new price architectures which strategically position product groups, products, articles and special products price-wise.
  • Implementing price increases in the market:
    We support our customers in the preparation, the implementation and the monitoring of the price increases in the market. The process of price increases equally involves internal participants (sales, product management, IT) as well as the external business partners. A specific systematic of price increases differentiates according to the importance of products and customers.





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