Margin differentiation is a comparison of your margin on price-sensitive sales vs. your margin on incidental non price-sensitive sales. Two-thirds of your sales are price sensitive contracts, frequently purchased items, or commodities. Margins are tight on these sales because customers buy frequently, annual spend is high and competition is fierce. Even top performing companies with the highest margin in each sector make no more than the average company on price sensitive sales.
Where top performing companies have an advantage is on the third of their sales that are incidentals – items purchased on occasion, with a relatively low annual spend. These companies enjoy a 12 to 15 point margin difference between incidental and price-sensitive sales.
The pricing experts at Profit2 help manufacturing and distribution companies improve margins and increase profits.
To find out if you are effectively differentiating your pricing, Contact Us or call (913) 897-0159 and speak to our experienced pricing partners. We will help you measure how much opportunity you have and what you need to do, step-by-step.