Your prices are set by cost-plus and habit

What is changing

Ranges have grown through acquisitions and launches. Many businesses now manage tens of thousands of prices across several legacy systems.

Marketplaces and price transparency let customers compare trade prices instantly, pulling prices down wherever there is no clear structure to defend them.

Common signs

• List prices are cost plus a fixed margin, and new products launch the same way.
• There is no floor, target or ceiling, so reps price in open space.
• The same product sells at different net prices through different channels.
• Customers are not segmented by value or price sensitivity; everyone gets the same logic.
• Online prices and marketplaces are pulling your trade prices down.

Where it leads if left alone

Cost-plus leaves margin unclaimed wherever a customer would pay more, and prices too high where the product competes on price. Margin is lost in one place and volume in another, and neither shows in the reports.

The decision that is hard to reverse

Launch prices set on cost-plus are rarely recovered. The first price a customer sees becomes the reference for every later negotiation.

What recovery costs

Rebuilding a price list across a large range means repricing product families one at a time, testing each with the sales team and managing customer reaction. Without a method, the work stalls after the first few categories.

What good looks like

• Prices reflect what each segment values and how much pricing power the business holds.
• Each product has a floor, target and ceiling, with clear relativities across the range.
• Discount tiers follow written criteria by customer type.
• New products are priced from value before launch.

What it is worth

In the worked example below, a 1% change in realised price moves EBIT further than the same change in volume or cost.

Source: Pricing Insight worked example.

How it is treated

1. Find what customers value. Customer value discovery by segment, and the full spread of prices actually paid for each product. Strategic EBIT Opportunity & Risk Diagnostic →
2. Set the price for every SKU and customer. Project Blackbird combines customer pricing power and SKU price position to recommend a price at three risk levels, with the EBIT effect of each. EBITDA Improvement Program →
3. Install a structure that holds. List-less-discount architecture by customer tier, price floors, and a price ladder the sales team can explain. Value-Based Culture & Transformation →

How Pricing Insight works

Relevant work: Bunzl replaced cost-plus pricing across 18,000 SKUs, with +800bps gross margin on targeted SKUs, A$5.7m EBIT and 98.3% of customers retained (realised).

Experience

Ron Wood has worked in pricing for 30 years: first as a pricing and commercial manager in FMCG, building materials and capital equipment, and since 2007 as adviser to more than 160 businesses.

Method

Each engagement follows the same sequence: diagnose, optimise, embed. Recommendations rest on the client's own transaction data, and every figure can be traced to it.

Measurement

Results are measured against a margin baseline agreed with the client's finance team, and reported as realised, modelled or identified.

Continuity

Ron Wood leads each engagement from the first meeting to handover.

Which of your prices are set by formula, and which by what the customer values?

A first conversation establishes how this applies in your business and whether a diagnostic is warranted.

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