Month: November 2015

How to Leverage Six Sigma Methodology to Drive Continuous Margin Improvements

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This is the first in a six part blog series on how manufacturers and distributors can apply Six Sigma methodology to the pricing function to generate repeatable margin gains.

A disciplined process is needed to create Pricing Excellence – SPA’s Six Sigma training drives real results focused on profitable growth.

“Measure of success at strategic pricing is not how much it increases price but how much it increases profitability.”

Thomas Nagle – Professor, University of Chicago

Current State of Pricing

  • Limited negotiation skills
  • Cost + pricing
  • No analytical tools
  • No profitability improvement plans
  • Sales rep discount vs. sell
  • Reactionary pricing tactics
  • Inconsistent pricing structures
  • No growth in GM%
  • Ignores market reality
  • No strategy to improve margins

Six Sigma Pricing

  • Negotiating strategy and tactics
  • Value-based pricing
  • Automated decision making tools
  • Customer Profitability improvement plans
  • Sales team selling value
  • Pricing strategy and leadership
  • Consistent and fair pricing architecture
  • 2 to 4% growth in GM%
  • Pricing based customer sensitivity
  • Continuous improvement focus

So clearly the latter is the better way to go – but… How do we get there from here? What are the steps and areas of focus that will get us there successfully?

The following are the five areas we will dive into in this blog series that will help illuminate the path to Six Sigma Pricing Excellence.

  1. Define: set roles, responsibilities, and goals for the team in alignment within the business
  2. Measure: build correct measurements and incentives for each person
  3. Analyze: use reporting tools to find opportunities to grow or challenges to fix
  4. Improve: build processes, systems and tools to assist teams and create reporting tools to track improvements
  5. Control: set and enforce pricing authority levels and repeat previous steps as continuous improvement never stops

Six Sigma Master Blackbelt Greg Preuer, of SPA has created the first course designed to apply time tested Six Sigma methodology to pricing.  Those who study with Greg will learn not only how to drive the pricing process but how to sustain the gains and automate the process.  They will become Six Sigma experts (Blackbelt) in business process with a focus placed squarely on price management.

Graduates from this course will learn to chart a clear path to pricing improvement.  They will learn each of the following steps:

  • How to design and design goals which are consistent with their company’s pricing strategy.
  • How to measure and identify characteristics critical for pricing success.
  • How to analyze the current situation and steps along the way.
  • How to design an improved alternative which moves closer to the desired result.
  • How to verify that actions taken create the right results.

To learn how you can realize the benefits of SixSigma Pricing, contact SPA today at info@strategicpricing.com or 216.455.1545.

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