SPA Featured in The Distributor Channel article “Applying Black Belt Principles to the Pricing Process”
SPA was featured in a recent The Distributor Channel article, “Applying Black Belt Principles to the Pricing Process”, which discusses how distributors can apply Six Sigma methodology to the pricing function to generate repeatable margin gains and why a solid pricing process is an essential part of any strategic initiative.
Excerpts of the article follow.
“Initially, Black Belts worked entirely within the manufacturing process”
One person saw the advantage of putting the same principle to work on the pricing process. Enter Greg Preuer of SPASigma. Greg was certified as a Master Black Belt DMAK by General Electric. He saw an opportunity to apply the same Black Belt methodology to the pricing used by companies.
The goal: better pricing programs.
“Pricing is a big deal”
In an age when most companies find themselves facing competitive pressures, pricing policies have fallen into disrepair: special pricing abounds, discounting has grown rampant and operating margins have been pushed and squeezed. Here’s where Six Sigma (Black Belt) efforts come into play. Black Belts work to understand and leverage each specific customer’s willingness to pay a price slightly different from their peers. Simply put, they focus on already existing price sensitivity variances between customers.
Most companies rely heavily on their sales teams for what little direction they may have. But the reality of the situation is very few sales teams have the proper training or tools to determine price. Because they place priority on closing the order at any cost (or price,) they tend to underestimate the proper price level. With this approach in mind, it’s no wonder that pricing has fallen in to disarray. What sales teams crave is an advanced scouting report on what each specific customer would be willing to pay for every (specific) product in the portfolio; real data that kills the guessing game they currently must play.
“One wholesaler described pricing in his organization as a visit to the wild west.”
Lone Ranger salespeople set pricing for their customers mostly without firm understanding of costs associated with handling or servicing the customer. Gross margin numbers are used for the same customer regardless of order size or difficulty in providing the products. Reviews of the pricing used by hundreds of distributors reveals sell prices using familiar numbers which predictably end in zero or five. Profitability suffers.
“Quoting Greg Preuer:”
“While most formal Black Belt training uses case studies pulled from academia, we apply exercises using the student’s own company’s data. We’re talking about real actions with real people and dynamic environments. It’s not just busy work to flesh out the course material, our exercises are tasks developed to make an impact on your companies pricing organization.” The Black Belt makes a real impact even before certification is achieved.
Click here to read the complete article.
About SPASigma Six Sigma Pricing Training
“Basic human processes are 4 Sigma at best … 99% good is just not good enough.”
Greg Preuer – Former Pricing Director at Cooper Lighting and General Electric
Click here to learn how manufacturers and distributors can apply Six Sigma methodology to the pricing function to generate repeatable margin gains.
Click here to read an interview of Greg about developing a program for training others in a Six Sigma Black Belt of Pricing program. Greg applied the same concepts while successfully serving as the Director of Pricing at Cooper Lighting.
Click here to learn how you can realize the benefits of SixSigma Pricing training online.
To learn how you can realize the benefits of Six Sigma Pricing Training on-site for your team, contact SPA today at firstname.lastname@example.org or 216.455.1545.
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