Case study · Capital equipment · Engines, power generation and parts · 8 min read
Source: Pricing Insight engagement records; Fortune 500 company profile for Cummins (updated 28 July 2026); Cummins Inc. Q3 2026 earnings presentation (5 November 2026). Revenue and employee figures are Cummins' own. They are not Pricing Insight results.
Two habits were eroding margin: discounting to win the sale, and prices built up from cost. Cummins South Pacific sells, services and supports Cummins engines, power generation systems and parts across Australia, New Zealand and the Pacific. It is a wholly owned subsidiary of Cummins Inc., the Fortune 500 engine maker. Pricing Insight ran a pricing diagnostic across the business and then a pricing strategy workshop with about 20 executives: the executive leadership team and the key sales directors. The diagnostic found that the business relied on discounting and set prices by cost-plus, and that together they were eroding margin and leaving products underpriced. The workshop turned those findings into priorities, owners and next steps. Cummins then implemented a series of margin improvement initiatives.
| Client | Cummins South Pacific Pty Ltd, Scoresby, Victoria: the Australian sales, service and distribution business of Cummins Inc. (NYSE: CMI), a global maker of diesel and natural gas engines, power generation systems and components. |
| Service | Pricing diagnostic and pricing strategy workshop, in the format Pricing Insight now offers as the Revenue, Pricing & Margin (RPM) Roadmap. |
| Status | Capability built. Cummins implemented a series of margin improvement initiatives after the workshop. Pricing Insight did not measure their financial effect, and no financial result is claimed. |
| Scope | About 20 executives: the executive leadership team and the key sales directors. |
The brief
Find where margin was being lost in how prices were set and discounted, and give the leadership team an agreed plan to recover it.
01A Fortune 500 engine maker with several ways to set a price
Five segments, one brand. Cummins Inc. was founded in 1919 and is based in Columbus, Indiana. It reported revenue of US$33.7b in 2025 and employs 67,400 people. Its Engine and Components segments sell to truck, bus and equipment makers. Its Distribution segment sells parts, service and power generation through company-owned and independent distributors. Its Power Systems segment builds high-horsepower engines and generator sets, and Accelera holds its battery, electric and hydrogen businesses.
Cummins South Pacific is the distribution business in this part of the world. It sells, services and supports Cummins engines and power generation from a head office in Scoresby, Victoria. Its 2022 Modern Slavery Statement reported 32 company-owned branches across every state and territory and revenue of about A$1.17b.
Each channel sets price a different way. An engine supplied to an equipment maker is priced under a negotiated supply agreement. A replacement part is priced from a list, less the discount each customer has earned. A generator set for a data centre or a mine is priced as a project, often by tender. Workshop labour and service agreements are priced by the hour or by the contract. A pricing diagnostic in a business of this kind has to cover all four.
02What the diagnostic found: discounting and cost-plus pricing were eroding margin
Two findings, one result. Pricing Insight reviewed how prices, discounts and price changes were set and approved across the business. Two practices stood out, and both took margin the business could have kept.
Discounting did the selling
The business relied on discounting to win and keep sales. A discount given to close one deal tends to become the starting point for the next, so realised prices drift below the price list and margin erodes a little with every negotiation. In a business that sells engines, parts and service to the same customers year after year, that drift compounds.
Prices started from cost
Prices were set by cost-plus: the cost of the product, plus a standard mark-up. Cost-plus takes no account of what the product is worth to the customer. A part that keeps a haul truck or a generator running is worth far more to its owner than the mark-up on its cost suggests, so cost-plus left products underpriced.
Reliance on discounting.
Discounts used to win and hold business, pulling realised prices below list and eroding margin.
Cost-plus price setting.
Prices set from cost and a standard mark-up, with no measure of value to the customer, leaving products underpriced.
03What Pricing Insight did: a diagnostic, a strategy workshop and a roadmap
Four steps, each feeding the next. Pricing Insight ran the diagnostic and the workshop; the Cummins South Pacific leadership team made the decisions and owned the initiatives that followed.
Agreed the questions.
Pricing Insight and the Cummins sponsor agreed the commercial questions, the participants and the information needed before any analysis began.
Ran the diagnostic.
A review of how prices, discounts and price changes were set and approved, and where the evidence showed margin being given away.
Ran the strategy workshop.
About 20 executives, the leadership team and the key sales directors, worked through the findings and separated what the evidence supported from what was assumed.
Built the roadmap.
Each initiative was marked to pursue now, investigate further or defer, with a named owner and a next decision point.
Putting the sales directors in the room mattered. Discounting decisions are made in the field, and cost-plus mark-ups are applied by the people who quote. A plan agreed by the leadership team alone would have left the people who set and give away price outside it.
04What changed: a series of margin improvement initiatives
From findings to action. After the workshop, Cummins South Pacific implemented a series of margin improvement initiatives, built on the priorities the leadership team and sales directors had agreed.
Status: capability built. The engagement outputs are the diagnostic, the strategy workshop and the roadmap, from Pricing Insight's records. Cummins implemented a series of margin improvement initiatives after the workshop; Pricing Insight did not measure their financial effect and claims no financial result. Not disclosed: the individual initiatives, their results and fees.
Price is still a margin lever Cummins names in its own results. In the third quarter of 2026, Cummins Inc. reported revenue of US$9.4b, up 13 per cent, and an EBITDA margin of 18.9 per cent, against 17.2 per cent on an adjusted basis a year earlier. It attributed the improved margin in its Power Systems segment, which reached 25.4 per cent EBITDA on revenue of US$2.3b, to strong demand, mainly for data centre power, and to favourable pricing.
05The Pricing Periodic Table elements this work addressed
Six elements addressed, three that hold the gains. The Pricing Periodic Table maps 61 elements of pricing capability in nine domains across three pillars: Value, People and Structures. The two findings sit in the Price Architecture domain; the workshop worked on Pricing Strategy and Management Alignment to fix them.
| Findings | 50 Md Price-setting method, 51 Dt Discount structure and tiers: cost-plus price setting, and discounting relied on to win and keep sales. |
| Strategy and alignment | 06 Ws Written pricing strategy, 20 Ed Executive direction, 21 Ca Cross-functional alignment: the leadership team and the key sales directors agreeing one set of pricing priorities. |
| Program | 12 Mi Margin improvement program: the series of margin improvement initiatives Cummins implemented after the workshop. |
| Holding the gains | 03 Vq Value quantification, 44 Or Override and discount analysis, 61 Da Discount authority and controls: a measure of value to replace cost-plus, and checks and limits on discounting. |
06Three lessons for a CEO
Start the price from value, not cost
Cost-plus tells you what a product costs to supply, not what it is worth to the customer. In engines, parts and service, where a breakdown costs the customer far more than the part, cost-plus leaves money with the customer.
Give every discount a reason and a limit
A discount that wins one deal resets the starting point for the next. Decide what a discount buys, who can approve it, and check what was given away after the invoice.
Put the sales directors in the room
Discounts are given and mark-ups applied in the field. A margin plan the sales directors helped write is a plan the sales force will carry out.
07Questions this case study answers
Does Pricing Insight work with Fortune 500 and capital equipment companies?
Yes. Pricing Insight ran a pricing diagnostic and strategy workshop for Cummins South Pacific, the Australian business of Fortune 500 engine maker Cummins Inc. It has also worked with capital equipment businesses including Hyster-Yale Asia Pacific, Sandvik Mining and Mercedes-Benz Commercial Vehicles. The work ranges from a single strategy workshop to a diagnostic, a capability program or algorithmic price optimisation, in Australia and across Asia Pacific.
Why does cost-plus pricing underprice capital equipment and parts?
Cost-plus sets the price from what the product costs plus a standard mark-up, so it ignores what the product is worth to the customer. For engines, generators and parts, that worth includes uptime and the cost of a machine standing idle, which can be far above the mark-up. At Cummins South Pacific, the diagnostic found that cost-plus price setting left products underpriced.
How do you stop discounting from eroding margin?
Find where discounts are given and what they buy, then set rules for who can approve them and check realised prices after the invoice. At Cummins South Pacific, a pricing diagnostic identified a reliance on discounting, and a strategy workshop with the leadership team and key sales directors turned the findings into a series of margin improvement initiatives.
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Is discounting or cost-plus setting your prices?
A first conversation covers how your business sets and discounts price, what your leadership team and sales directors need to agree, and whether a diagnostic, a strategy workshop or both is the right first step. Ron Wood, +61 410 534 099.
Ron Wood is the Founder and Managing Director of Pricing Insight, an Australian pricing strategy consultancy he established in 2007. He has worked in pricing for around 30 years, first as a pricing and commercial manager in consumer goods, building materials and capital equipment, and since then across more than 160 pricing engagements. He also founded Pricing University, which has trained more than 5,000 executives.
To discuss a pricing diagnostic or strategy workshop, contact Ron Wood at info@pricinginsight.com.au or on +61 410 534 099, or visit Pricing Insight.
Published with the permission of Cummins. Engagement details are from Pricing Insight's records. Company and financial facts are from the Fortune 500 company profile for Cummins (updated 28 July 2026), the Cummins Inc. Q3 2026 earnings release presentation (5 November 2026) and the Cummins South Pacific Modern Slavery Statement 2022, reviewed 13 November 2026. Financial figures are as reported by Cummins, in US dollars unless stated; they are not Pricing Insight results. No financial result is claimed. Fees are not disclosed. Figure 1 is a diagram of the engagement. Photography: Gustavo Fring, Pexels.
