Do You Have a Price Leak or a Price Waterfall?

USS Constitution

While living on the East Coast for a couple years, I enjoyed visiting the USS Constitution, the oldest commissioned naval vessel afloat in the world. Learn more about the USS Constitution in this video. It takes a lot of effort and resources to keep a wooden warship in service since 1797; it also takes a lot to keep a business afloat for many years, through good times and bad.

Even after downsizing, reducing expenses, and lowering prices to stay afloat during the recession, some companies are still having difficulty staying above water. What else can they do to keep their ship from sinking while sailing away from danger toward calmer seas of prosperity and stability? They can look for leaks in the vessel itself rather than further reducing crew and cargo. In business, one of the main leaks that can lead to drowning is a price leak.

According to this article, “Price Fixing,” in CFO Magazine, a price leak occurs when a company doesn’t get the price it could or should get for an item. If enough price leaks occur, the company will sink into a sea of losses that cannot be recovered without significant effort, investment, analysis, and correction of the root causes. In some cases, there is no way to stem the tide in time to rescue the company from going under.

Niagara Falls

Before any price leaks that you may have create a deluge that sinks your ship, you can perform a price waterfall analysis to discover the patterns in your costs, the discounts you offer, your current profit, and how you may be able to increase profit by making adjustments to your operations or deal structure. Read more about price waterfall analysis in this article, “The Profit Leakage: The Price Waterfall” in Chief Executive Officer magazine. You can also optimize price by segmenting the types of customers you have, their buying habits, and the circumstances that determine what various customer segments are willing to pay for your product or service.

Do price waterfall analysis and price optimization sound like entering unchartered waters of undiscovered revenue, worthwhile for the long voyage but fraught with time and expense in the short term? You probably will discover ways of increasing revenue with price waterfall analysis and price optimization. According to the CEO magazine article cited above, companies can increase profit by up to 15 percent with price waterfall analysis. However, it doesn’t need to be expensive or time consuming. With software-as-a-service (SaaS) price optimization products such as Sales Compass from Mimiran, you can quickly get the business intelligence you need to fix price leaks and help keep your ship afloat.

Do you want to learn more about steering your business to increased profitability by identifying and fixing price leaks that may be threatening your business just like battles, icebergs, or leaks threaten a ship? Here’s a great way to do that free of charge in an hour: check out the webinar, “Where B2B Companies Leave 10% of Their Profit on the Table,” conducted by Mimiran on Wednesday, February 24 at 10:00 a.m. Central Time. According to Mimiran, B2B companies often leave 10 percent or more of their money on the table during manual discount negotiation processes.  In this webinar, Mimiran will show how this happens, the impact on sales organizations and the company, and approaches to getting that money back in your pocket. Mimiran Sales Compass can help you navigate through the straits of price optimization and price waterfalls to an undiscovered sea of increased profitability. Price optimization may be one of the best investments you ever made in your business.

Do you have a good chart of your customer segments, the price they’re willing to pay, the price they do pay, what factors determined that price, how it affects your revenue and profit margin, and what you can do to change course and fix price leaks?