Indianapolis — Plastics processors should not be afraid to raise prices even when competition for business makes them think they do not have a choice, a pricing expert believes.
Even just a 1 percent increase can have a significant impact on a processor's bottom line, said Casey Brown, a self-professed pricing geek and president of Boost Profits, a Columbus, Ohio-based consulting firm.
"Accepting mediocre pay for excellent work is unjust," she said during a presentation at the recent Benchmarking & Best Practices Conference organized by the Manufacturers Association for Plastics Processors in Indianapolis.
Plastics processors would serve themselves well to pay more attention to their pricing, she said. But pricing does not always receive the attention it deserves compared to other considerations such as efficiency, cost management and operations.
"Give pricing just a little more of your attention and it will revolutionize your business," she said.
A company with a 10 percent profit margin can increase its profit margin by 10 percent by instituting a 1 percent price increase, she said.
"Revenue is for vanity, profit is for sanity. You can write that one down," she told the crowd.
But some firms are afraid to price their products appropriately, fearing the move will cost them business.
While customers will threaten to move business elsewhere if there are price increases, Brown countered that what comes out of their mouth is not necessarily reality. Customers also will consider other factors when deciding where to buy.
This can be true for companies that are risk adverse and critically depend on processors to deliver products on time and as promised. Buyers' jobs could be on the line if they make a mistake that disrupts their own operations. So while they might indicate price is the key consideration, it not always is, Brown said.
"Pricing is a matter of confidence," she said. "This is not a math exercise. This is a gut exercise."
"You have a strong hand to play. Do you solve problems for your customers? Do you sell excellent products? Do you wrap excellence around it in the form of your sales and support processes? Do you believe in what you sell? If you do, I invite you to consider you have a much stronger hand to play. That power dynamic is much closer than often believed."
If a customer tells a plastics processor their price is too expensive, the actual message is that they do not yet trust them, Brown said.
The pricing consultant said plastic processors should be ready to walk away from certain contracts. "Don't price to keep your worst customers. Let them go," she said.
"This is more than just a mindset shift. There are real dollars at stake here," she said. "Rather than make a fear-based decision, I invite you to make a data-based decision."
"Do not be tempted to underprice what is valuable to customers just because you are masterful in making it," Brown said.