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Capital Equipment
Pricing Strategy
We help equipment suppliers shift from cost-plus to value-based pricing, improving quote consistency, deal margins, and pricing confidence in the field.
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Our numbers
A comprehensive set of services
Building Materials:
Industry Insight
Sales teams are increasingly expected to do more with less, often resulting in unintended margin erosion.
With the rise in housing and civil construction demand, a major building boom is underway in the Australian market.
Many companies have been able to retain margin percentages and, in some cases, grow margins. However, many other companies have sold more volume at the same margin or slightly lower margins driven by price discounting or increased rebates. It has been a case of profitless prosperity. The opportunity to generate earnings growth has yet to be realised.
The building materials industry is witnessing a significant shift in how materials are purchased. The increasing influence of professional procurement executives is disrupting traditional, relationship-based selling, which has historically safeguarded revenue and margins.
Industry insights
The capital equipment business model used to rely on an installed base of new units sold at low margin to create demand for high margin spare parts and service as a way to grow profits.
The major risk for OEM capital manufacturers is not overpricing but underpricing. Pricing based on cost and market segment is no longer an effective way to set and manage pricing to market.
In the past, the capital equipment business model relied on an installed base of new units in the field. This model created demand for spare parts, services, and casual fleet hire. New units were often sold at cost or single digit margins to drive demand.
With the advent of more sophisticated applications, the integration of technology into capital equipment, and the fragmentation of customers into very specific market segments, pricing for capital equipment requires more sophisticated approaches to maximise margin.
OEM manufacturers compete in a global environment with continued pressure on margins. Cost-of-ownership of capital equipment including price, throughput, downtime, maintenance cost, training and spare parts used to be sufficient for manufacturers in evaluating their equipment purchases.
With costs constantly increasing, companies need to look elsewhere to optimise their return on investment. Many are supplementing cost-of-ownership measurements with asset management techniques.
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Building Materials:
Industry Insight
Markets are now segments of one customer, and pricing strategies and structures need to be flexible to address this level of complexity.
With the advent of grey markets, Will-Fit parts makers and online auction houses, there are even more margin pressures on the previously protected aftermarket product range.
Many OEM companies have made some changes to pricing but from our observations there are further potential downsides to margins if the only initiatives are the introduction of more stringent signoff policies and the employment of a pricing analyst.
Despite these challenges, there are still substantial margin improvement opportunities for OEM equipment manufacturers. Detailed line-item level analysis of each model in the range is required along with an even deeper analysis of the value drivers for each application of that product.
Working in conjunction with dealer networks and distributors, OEM companies can create a business model to address the needs of dealers. The aftermarket product range also presents substantial margin improvement opportunities through algorithmic price segmentation. Many OEM companies have created marketing codes to identify potential pricing power for various park groups.
Managing a range of 10,000 to 100,000 parts requires a more sophisticated approach to pricing strategy. Detailed line by line analysis of each part is needed to identify the real pricing power opportunity for those parts.
Expertise
Our experience in the OEM and capital equipment sector is significant. We work with Fortune 500 companies, European global companies and ASX listed companies.
Our work with these companies has spanned Australia, New Zealand, Singapore, Malaysia, Thailand, Vietnam, and Indonesia. We have experience negotiating transfer prices from factories located in the USA, Japan, the Netherlands, and Italy.
We have also worked closely with dealers in all of the above countries with deep exposure to the Caterpillar global dealer business model.
Areas where we can help your business include:
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Let’s work together. Get a quote today.
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Check how our process is done
Planning
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Estimating
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Building
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What our customers say about us
“They did an amazing work for our home”
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“Our home design is unique, beautiful and special”
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“Love how our home looks more comfy and modern”
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Browse our news & articles
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Lets work together
Whether you're ready to optimise your pricing or want to explore what's possible, we'd love to hear from you.
Specialists in pricing strategy, margin expansion and commercial capability.
Based in Sydney, serving clients across Australia and beyond.
info@pricinginsight.com.au
+61 410 534 099
Level 26, 1 Bligh Street, Sydney NSW 2000