Pricing section

Pricing section or Estimation Dept.  this label may be uncommon! In fact, this job and its responsibilities are very serious and often the cause of losses, but how? Follow the tweets below…

 

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This topic may be the most important in business whether it is a physical product or a service so we wish to focus and share for the benefit. In fact, most companies rely on the sales team or general manager to make pricing decisions. Unfortunately, the majority adopts a dependency strategy for competitors and the market.

In other words, it would be the price of similar products or similar services in the market and trying to break that price or converge with it! In fact, until this point there is no mistake in the way of thinking and strategy, but the error starts from the following:

– Setting prices regardless of direct and indirect costs and what we mean by direct costs are those basic costs such as raw materials and employees who are always working on the production of the product or the completion of the service.

Indirect costs are overhead costs on the enterprise divided by all products in proportions.

– Setting prices without looking at these costs in order to compete and win contracts may expose the company to losses, which we have observed in many electrotechnical construction and installation companies as an example.

The price miscalculates the costs of labor and materials required according to specifications and works to win competitions at all costs.

– Each company works to determine the salaries of its employees, but it is overlooked by human resources managers that salaries must be commensurate with the prices of products, services, quality and value provided, and therefore decisions to determine salaries and annual increases are not taken in isolation from the pricing, finance and sales section.

– Each company works to determine the salaries of its employees, but it is overlooked by human resources managers that salaries must be commensurate with the prices of products, services, quality and value provided, and therefore decisions to determine salaries and annual increases are not taken in isolation from the pricing, finance and sales section.

– Do not allow the sales department to take over the pricing function. There is a conflict between the objectives of this section in achieving Target and the company’s objectives in achieving the highest possible profit margin.

– Do not assume that the low price is the solution! Value provided and quality is more important for continuity. – When prices are high give buyer more options.

– When the price depends on the detail and design of the product ,project or service taking into account the accuracy and specifications of the quantities, possible alternatives, the duration of the purchase, hidden costs such as freight, clearance, customs, training costs… etc. Precision is always required in the pricing section.

– Purchasing managers are now more aware, experienced and price-informed so make your pricing clear and do not complicate the technical and financial offer.

– Finally, we conclude which is the best good price and mass production within specific and specialized standard specifications or high price and give the customer flexibility in specification and design?

In fact, this depends on the way the production line is designed and the internal way of working, but what we should emphasize is that combining the two types on one line of work will mean a real disaster in prices and in time and costs. Therefore, the two types must be separated and priced especially in case of expansion of the customer’s options.