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White paper · Diagnose · 29 min read
Sources: Farmlands and Mitre 10 New Zealand case studies, published on pricinginsight.com, both identified opportunities rather than realised results; the Pricing Periodic Table, CXO Edition, for the foodservice packaging example, stated as an annualised realised value.
Four New Zealand businesses have published Pricing Insight work. Farmlands, the rural supplies co-operative headquartered in Christchurch, where a pricing diagnostic identified A$3.5m to A$6.2m of EBIT opportunity. Mitre 10 New Zealand, where more than A$10m of margin opportunity was identified across more than 80 stores. SIMCRO, the Hamilton maker of animal-health delivery systems, where a private equity owner commissioned a customer-value-led pricing strategy. And Devro, the collagen casings manufacturer, which negotiated higher price increases in Australia and New Zealand on proven customer value, a realised result. The method was the same in each: the Strategic EBIT Opportunity & Risk Diagnostic reads twelve months of invoices customer by customer and product by product, scores the business against the 61 elements of the Pricing Periodic Table and sizes the opportunity against a baseline finance accepts. New Zealand changes the weight on a handful of those elements, and this paper sets out which.
Scale, imports, the exchange rate and the shape of the channel are the differences. One national account or one co-operative carries a share of a New Zealand book that no single customer carries across the Tasman. Much of what is sold is imported or made from imported inputs, so the cost of goods moves with the New Zealand dollar between annual reviews. Rural and hardware channels run through a few national co-operatives and chains, so rebates and agreement terms decide the net price more than the invoice does. And many customers buy in both countries. What does not change is where the margin goes: dispersion between comparable customers, overrides at the counter, special prices without an end date and rebates nobody in the field can see. This paper takes the differences first, then the common faults, then the elements of the Pricing Periodic Table that carry the fix. Every figure is labelled realised, identified, projected, recommended or illustrative, and the anonymised examples come from the Pricing Periodic Table, CXO Edition, with the labels the book gives them.
The question this paper answers
What changes in a pricing strategy when the business manufactures or distributes in New Zealand, and what does not.
Five Pricing Insight clients with work in New Zealand appear below in the same six-part form: the problem and what it put at risk, why it was hard to fix, what Pricing Insight did, the outcome with its status, the benefit to the client, and the Pricing Periodic Table elements the work built. Farmlands and Mitre 10 New Zealand show what a diagnostic finds in a concentrated channel, SIMCRO and Devro show value priced against procurement teams and imports, and the New Zealand team of a foodservice packaging distributor shows what one written account plan returned.
01New Zealand changes four inputs to the price, not the method
Four inputs move. The first is concentration. When a single co-operative, retail chain or processor buys a large share of what a manufacturer makes, a concession to that account is a concession across much of the business, and the customer knows it, so pricing power is scored account by account on switching cost, price awareness, relationship depth, growth and profitability. SIMCRO faced exactly this: a Hamilton business negotiating with procurement teams from multinational pharmaceutical companies, where the published strategy linked every concession to a commitment delivered in return, through minimum quantities, price breaks and earned rebates rather than upfront discounts.
Imports set the ceiling on the lines buyers can compare. Where every buyer can see an import price, pricing power has to come from what imports cannot offer, and the Pricing Periodic Table, CXO Edition puts supply chain speed first among those things: delivery reliability, short lead times, technical support on the customer's line and the cost to the customer when the alternative is a container six weeks out. Devro is the published case. Lower-priced imported casings arrived in a market that had seen little direct competition, and the business lifted price by proving what its casing was worth in yield and downtime on the customer's own production line rather than by matching the import. Its Sales Director for Australia and New Zealand put the result on record: "Undertaking the Customer Value Discovery program helped us identify additional sources of value and allowed DEVRO to negotiate higher price increases both in Australia and New Zealand."
Exchange rate exposure sits in the cost of goods, and section 03 sets out the written rule that deals with it. Two-country accounts are the fourth input. A customer buying in both markets compares the two invoices, and the lower price becomes the reference for the next negotiation in the other country, the same mechanism that pulls branch prices down to the lowest branch inside one country. Section 07 covers how two businesses priced across it.
02Dispersion, overrides and specials look the same in Christchurch as in Sydney
Two findings recur. The first is dispersion, the same product sold to comparable customers at prices far apart, with volume explaining only a small part of the gap. The second is the override, a sale below the system or agreed price keyed at the counter or in the field. At a New Zealand rural supplies co-operative described in the Pricing Periodic Table, CXO Edition, branch staff overrode prices at the counter so often they had a name for it: the good bugger button. The chief executive estimated that about 80 per cent of lost margin sat in sales under A$2,500 and proposed hiding cost from sellers. Our advice was to test first, by comparing the share of small sales carrying a manual override with the share sold at the standard price. If sellers are overriding, limits fix it. If the standard prices are too thin, hiding cost changes nothing.
Farmlands is the published version of that work. The diagnostic identified A$3.5m to A$6.2m of EBIT opportunity by aligning teams, controlling overrides and simplifying national pricing structures, an identified figure and not a realised one. At Mitre 10 New Zealand the diagnostic identified more than A$10m of margin opportunity across more than 80 stores, covering pricing strategy alignment, team capability, governance and execution; that too is an identified opportunity, and no realised reconciliation is public. Neither figure is a benchmark for another New Zealand business. Special prices complete the set: a price struck for one job or one season, loaded without an end date, missing the next increase and becoming the customer's standing entitlement. In a concentrated market the pool of specials is smaller in count and larger in value, because the accounts holding them are the big ones.
Farmlands
Rural supplies co-operative, Christchurch · A$3.5m to A$6.2m EBIT opportunity · Identified
| Client and problem | Farmlands, the rural supplies co-operative headquartered in Christchurch, was losing margin through price overrides and through national pricing structures that teams applied in different ways, and confidence in pricing had fallen with the margin. |
| Challenge | Pricing authority sat with branch and field staff, regional managers and head office at once. Invoice margin alone did not show what a sale earned once rebates and supplier funding were added and freight and service costs taken off. |
| What Pricing Insight did | A pricing diagnostic, then a pricing strategy for management and Board discussion. It manages price on integrated margin (invoice margin plus rebates and supplier funding, less freight and service costs), classifies every SKU by customer visibility and by revenue rank, and sets six priorities: a trading and quote desk, price optimisation, promotions and tactical discounting, master data integrity, floor pricing and a Pricing Council. |
| Outcome | A$3.5m to A$6.2m of EBIT opportunity identified, an identified figure and not a realised one. |
| Benefit to the client | The strategy sets three floors of discount authority, a reason code on every override and a review and expiry date on every customer exception, so each price below standard has an owner, a reason and an end date. A monthly Pricing Council chaired by the CFO owns the rule book. These controls are recommended. |
| Periodic Table elements built | 55 Tn True net price program; 61 Da Discount authority and controls; 44 Or Override and discount analysis; 40 Dd Deal desk and negotiation governance; 23 Pn Pricing council. |
Mitre 10 New Zealand
Co-operative of more than 80 stores · Over A$10m margin opportunity · Identified
| Client and problem | Mitre 10 New Zealand had no written trade pricing strategy, and each member store set its own discounts, methods and margin appetite, so the same trade customer could be quoted different prices at different stores. As a staff member put it: "There are 85 stores and 85 ways of doing things." |
| Challenge | Staff described about 80 national trade matrices, against 10 to 12 at competitors, many of them not competitive on timber and other key lines, so stores layered local matrices on top. Supplier rebates were not visible to the people pricing ("Account managers have no visibility over supplier rebates," a staff member said), and in a co-operative the support centre can recommend while the stores decide. |
| What Pricing Insight did | A pricing capability diagnostic across the support centre and member stores, then strategy recommendations: one published trade pricing strategy governed by a Mitre 10 New Zealand Pricing Council, price set by a head, middle and tail framework crossed with price sensitivity, minimum price floors on lines that are price-matched, customer discounts set by spend in place of static national matrices, and freight and services priced as add-ons. |
| Outcome | More than A$10m of margin opportunity identified across more than 80 stores, an identified figure; the strategy items are recommended and no realised reconciliation is public. |
| Benefit to the client | Once implemented, floors on matched lines stop price-promise sales below cost and one strategy across the network stops stores competing against each other on price, which lowers the co-operative's exposure to further margin slide as the trade market softens. |
| Periodic Table elements built | 06 Ws Written pricing strategy; 51 Dt Discount structure and tiers; 23 Pn Pricing council; 28 Cc Commercial capability and training. |
03Import cost and the exchange rate need a written pass-through rule
A rule written before the shock. The Pricing Periodic Table, CXO Edition sets out a pass-through rule in four parts, in order: a trigger, which is a cost moving above a set percentage or a named index or exchange rate moving by a set amount; an owner, usually the Pricing Council; a time limit from trigger to the start date of the new price; and symmetry, meaning that when costs fall the price stays unless the business chooses to share the saving. An Australian compostable packaging maker that partly credited its margin to a strong dollar projected that a 10 per cent fall in the currency, if not passed on, would cut gross margin by about A$12 million a year, a projected figure. A New Zealand importer carries the same exposure in kind and usually a larger one in proportion.
Permanent change for lasting rises, a surcharge for short-lived ones. A freight spike or a temporary levy is recovered by a surcharge, which is easy to introduce and easy to remove. A currency move that has held for two quarters, a wage settlement or a raw material reset belongs in the base price, with notice and a conversation.
| Question | Surcharge | Permanent change |
|---|---|---|
| Best for | Short-lived costs: a freight spike, a temporary levy, a currency move expected to reverse. | Lasting rises: wages, energy, raw materials, tariffs, a currency move that has held. |
| Easy to introduce | Yes. | Needs notice and a conversation. |
| Easy to challenge or remove | Yes, and customers will try. | No. It stays in the base price. |
| What it does to the next annual review | Reopens the whole price, because the customer treats the surcharge as negotiable. | Starts from the new base. |
| Who decides | The Pricing Council, under the written rule. | The Pricing Council, under the written rule. |
Surcharge against permanent change, after the Pricing Periodic Table, CXO Edition. The rule names the trigger, the owner, the time limit and the symmetry before any cost moves.
Exposure is known before the shock, or the rule has nothing to read. Buy-price and cost management starts with one current cost per item, supplier increases negotiated before they are loaded, and a quarterly check of system cost against landed cost on the top items, because approval limits and floors read the system cost and a stale one lets a below-cost quote through. An Australian maker of door locks and lever handles went three to five years without a general increase on key ranges while inflation and the exchange rate both moved against it; finance did not support the decision, and it stood because the general manager did not want to upset customers. The book's arithmetic on a decision like that: with a A$100 price, A$70 of cost and A$25 of overheads, absorbing a 3 per cent cost rise takes 42 per cent of operating profit, an illustrative calculation.
04Concentrated channels make rebate visibility the first control
Rebates decide the net price. When a manufacturer sells through a few national co-operatives and chains, the invoice price is the start of the negotiation and the rebate, the promotional contribution and the settlement terms are the rest of it. A sales team that cannot see the rebate treats the invoice price as the net price and discounts again: at one steel roofing business, head office agreed rebates with distributors and branch staff added discounts on top, so the business paid twice for the same sale. The reverse fault appears too. At the New Zealand rural supplies co-operative, supplier rebates were negotiated centrally and never shown to front-line sales, so reports showed a negative invoice margin on deals that were profitable once rebates were counted, and representatives avoided them. The recommended fix was a margin dashboard showing invoice margin and margin after rebates, freight and cost to serve side by side, a recommendation without a reported result yet.
True net price is the number to manage: invoice price less rebates, less supplier funding owed back, less freight to a South Island branch, less the cost of the service the customer is given for nothing, by customer and by product, on the quoting screen. An agreement register sits where the people who quote can see it, with every customer agreement in force, its terms, its owner and its end date, and each quarter the CFO checks the rebate accrued in the accounts against the register. SIMCRO's published agreement work followed the same principle: where a concession depended on volume or another commitment, the agreement made the exchange explicit rather than leaving the supplier carrying the cost of an expectation that might not be met.
SIMCRO
Animal-health delivery systems, Hamilton · Private equity owned · Capability built
| Client and problem | SIMCRO, the Hamilton designer of injectors, applicators and specialist packaging for veterinary medicines, sold to procurement teams at large multinational pharmaceutical companies, where a negotiation can narrow to the unit price of an applicator. Its owner, The Riverside Company, engaged Pricing Insight to improve margin and profitability. |
| Challenge | Much of the value sat outside the unit price: product performance, customised delivery systems, lead times, technical support and the cost to the customer of a supply or product failure. Direct pharmaceutical accounts, retail channels, product categories and territories each valued the offer differently, and quantity-based prices were not tied to the volume a customer finally bought. |
| What Pricing Insight did | A strategic pricing diagnostic of pricing practice, customer agreements, decision rights, sales capability, analytics and the quoting tool; Customer Value Discovery to map the benefits and operating risks SIMCRO managed for each customer; and price optimisation work comparing quoted with realised prices and product-level price variation. The agreement review tied each benefit to a commitment delivered in return, through minimum quantities, price breaks, earned rebates in place of upfront concessions and earlier preparation for renewals. |
| Outcome | Capability built: a customer-value-led pricing strategy, customer-agreement recommendations and a phased implementation roadmap, including customer-value pilots, a documented value proposition and value drivers built into the quoting tool. No financial figure is published. |
| Benefit to the client | Under the recommended agreements a lower price has a stated commercial basis, so SIMCRO is not left carrying the cost of a volume expectation that may not be met, and its sales teams meet procurement with value evidence beside the price. |
| Periodic Table elements built | 03 Vq Value quantification; 05 Dr Delivery reliability and value at risk; 15 Va Value-based agreements; 16 Rb Rebate and incentive design. |
05Matching a rival is a decision, not a reflex
One rival can take a market's margin to zero. The New Zealand rural supplies co-operative faced a competitor that ran a rewards scheme and tendered below cost. Front-line staff matched. Seed quotes went out at single-digit margins, and some were still lost at about 3 per cent. One staff member wrote: "Competitors are using a 0% margin to gain market share." Matching that rival line by line would have taken the co-operative's margin to zero.
Four responses, one default. The recommended fix was a competitor response grid: match only on the lines customers watch and never below floor; trade a different product, pack size or service level; hold, which is the default, and sell the value delivered; or walk away when the match loses money after rebates and freight. Three conditions apply before any match: a like-for-like product, within a set distance and time, and a current invoice or quote sighted. Every request is logged with the product, the competitor, the price claimed, the evidence and the result, and a year of the log shows which matches were needed to win and which were given away. The grid is recommended, not yet a reported result, and it protects the seller as much as the margin, because the decision rests on policy rather than on one person under pressure in front of the customer.
06Authority follows skill, and complex quotes go to a desk
Four tiers, and a test. The co-operative's recommended rule set gave no discretion at all on everyday low price lines, key value items and supplier-funded lines, which are the lines customers use to judge the whole business; a 2 per cent cap on A-lines, with reason codes and proof for any price match; moderate bands on B-lines; and wider discretion on C-lines and clearance against a signed-off plan. A second rule tied discount authority to skill: authority would go only to staff who could show they understood mark-up and margin. Neither rule has a reported result yet.
Discretion by product tier, as recommended at the rural co-operative in the Pricing Periodic Table, CXO Edition. The lines customers use to judge the whole business get no discretion at all. Recommended, not yet a reported result.
Skill is the constraint on authority. Staff at the co-operative sat a short pricing maths test as part of the wider review: the net price after a discount, the margin left after cost, the extra volume a discount needs to pay for itself, and the price rise that keeps margin after a cost increase. Field Sales, whose sellers quoted face to face and often decided alone how far to discount, had rated its own skill highest of all, and did no better than the rest. The system stored mark-ups while the reports showed margins, so staff mixed them up and quoting errors followed; the recommendation was to switch the price engine to target margin by product class, with a 90-minute refresher for anyone with override rights. A seller who reads a 30 per cent mark-up as a 30 per cent margin under-prices every quote by about seven points.
Complex quotes belong on a desk. The co-operative had lost the skills of its central quote desk and then removed it, so complex quoting moved to branch teams without tools or full cost information, and staff described a race to the bottom in some regions. The diagnostic recommended a small expert quote desk with service levels and a log of winning prices. Speed decides whether a desk works, because a slow desk is worked around: standard deals answered the same day, tenders within 48 hours, every decision logged. The CFO owns the floors and sees margin dollars given up, by representative and by customer, monthly, and each quarter the Pricing Council reviews the log and adjusts floors, thresholds and the tactics guide.
07Two-country accounts are priced on proven value
One account, two countries, one value case. A customer that buys in Australia and New Zealand compares invoices, and the increase it accepts in one country is the ceiling it argues for in the other. Devro built the value case before the price conversation: score the value drivers with customers, compare performance with the competitor, run a value discovery workshop with a leading customer, publish the value map, communicate it to the market and then plan the increase. The price rise came last, and the published result is higher price increases negotiated in both countries.
Devro
Collagen casings · Australia and New Zealand · Higher price increases negotiated · Realised
| Client and problem | For many years Devro faced little direct competition in Australia and New Zealand. Imported casings then arrived, some offered at up to half Devro's price, and on a price-per-metre comparison Devro looked expensive to food manufacturers that negotiated hard at every contract round. |
| Challenge | Much of what Devro provided did not appear on the invoice: technical support on the line, consistent casing performance, local supply, food safety certification and trading terms. When Devro's team and its customers scored the same value drivers, customers rated most of them as more important than Devro's own team did, so value was being given away. |
| What Pricing Insight did | Customer Value Discovery across 21 value drivers in six categories, scored against the main competitor, then a value management system and a sample supply agreement for a key account. With Devro, Pricing Insight designed the Devro Production Audit, which measures yield, breaks and machine performance on the customer's own line in kilograms per hour, and Pricing University trained sales teams in several countries to price and negotiate on that evidence. |
| Outcome | Higher price increases negotiated in Australia and New Zealand, a realised result. In the audit tool's worked example, which uses sample data and is illustrative, fewer running breaks and twists lifted output from about 1,400 to about 1,580 kg an hour, close to 13 per cent. |
| Benefit to the client | Price was defended against offers up to half its level without matching them, which protects margin at every contract round, and the sales team carries a measured value case into each negotiation in place of a price list and a discount. |
| Periodic Table elements built | 03 Vq Value quantification; 05 Dr Delivery reliability and value at risk; 38 Pv Price-increase negotiation; 28 Cc Commercial capability and training. |
A plan does not have to be long to work. The New Zealand team of a foodservice packaging distributor built a pack for an account worth about A$6 million a year: the customer's spend by category, a comparison with similar accounts and a playbook. Producing it took about two minutes. The team realised an 8 per cent increase on that account, worth about A$480,000 a year, a realised result stated as an annualised value. The comparison with similar accounts showed the customer priced below its peers, and the team held a written opening, target and walk-away before the meeting.
Foodservice packaging distributor, New Zealand team
One account of about A$6m a year · About A$480k a year · Realised, annualised
| Client and problem | An account worth about A$6 million a year was priced below comparable accounts, and each percentage point of price on it was worth about A$60,000 a year to the distributor. |
| Challenge | The gap was not visible until the customer's spend by category was set beside similar accounts. Without that comparison an increase request would have rested on cost alone, in a book where one large account carries a large share of the business. |
| What Pricing Insight did | Under the key-account method in the Pricing Periodic Table, CXO Edition, the team built a pack for the account: spend by category, a comparison with similar accounts and a playbook, with a written opening, target and walk-away held before the meeting. Producing it took about two minutes. |
| Outcome | An 8 per cent increase on the account, worth about A$480,000 a year, realised and stated as an annualised value. |
| Benefit to the client | About A$480,000 a year of price on one account, set by a comparison the customer could check, with the team's limit decided before the customer stated a position. |
| Periodic Table elements built | 39 Ka Key-account negotiation plans; 38 Pv Price-increase negotiation; 35 Wa Walk-away and alternatives. |
Pricing power is scored before the increase is set. A foodservice packaging supplier rated its customers on switching cost, price awareness, relationship depth, growth and profitability, and the scores put each customer in one of four tiers: harvest, which takes the full increase first; protect, which takes the standard rate with the value explained; monitor, which takes about three quarters of the standard rate and is reviewed account by account; and risk, which takes about half, and only after a written value case. About 16 per cent of its customers sat in the lowest tier and accounted for about 12 per cent of net sales. The model is recommended, not yet measured. For a two-country account the tier is set once, and both sales teams work to it.
Three things are safe to read from the five cases. Speed: the distributor's account pack took about two minutes to produce and returned an 8 per cent increase on a A$6 million account, and at Farmlands and Mitre 10 New Zealand the diagnostic sized the opportunity from the invoices before any price moved. Size: the identified opportunities are A$3.5m to A$6.2m of EBIT at Farmlands and more than A$10m of margin at Mitre 10 New Zealand, and the realised results are higher increases in both countries at Devro and about A$480,000 a year on one account. Risk: in each case the work closed a route by which margin left without a decision, whether overrides at the counter, store matrices layered on national ones, volume prices given without the volume, or a price-per-metre comparison against an import. Identified opportunities are not results, and none of these figures is a benchmark for another business.
08Eleven elements carry the New Zealand difference
The Pricing Periodic Table sets out 61 elements of pricing capability in nine domains, across Value, People and Structures. Eleven carry the weight in a New Zealand manufacturer or distributor: three define what the price is worth against an import, four decide how a cost or currency move reaches the customer and how a concentrated channel is managed, and four decide who may move a price and how fast a complex quote is answered. A business that builds the first group without the third gets a value case the counter discounts away.
| Group | Element | Domain | What it does in a New Zealand manufacturer or distributor |
|---|---|---|---|
| Value | 05 Dr Delivery reliability and value at risk | Customer Value | Puts a dollar figure on what a local supplier saves the customer against a container six weeks out: downtime, stock held, a failed batch. |
| Value | 03 Vq Value quantification | Customer Value | Measures value on the customer's own line, in the customer's own units, before the price conversation. |
| Value | 11 Cm Competitive response rules | Pricing Strategy | Match, trade, hold or walk, with three conditions before any match and a log of every request. |
| Structure | 56 Bc Buy-price and cost management | Price Architecture | One current cost per item, system cost checked against landed cost quarterly, supplier increases negotiated before they are loaded. |
| Structure | 43 Pi Price increase process | Analysis & Processes | The written pass-through rule: trigger, owner, time limit, symmetry; surcharge or permanent change decided by the kind of cost. |
| Structure | 55 Tn True net price | Price Architecture | Invoice price less rebates, supplier funding, freight and free service, by customer and product, on the quoting screen. |
| Structure | 17 Ar Agreement register | Customer Agreements | Every agreement in force with its terms, owner and end date, reconciled to the rebate accrual each quarter. |
| Authority | 61 Da Discount authority and controls | Systems & Controls | Discretion by product tier, from none on key value items to wider bands on clearance, enforced in the system. |
| Authority | 32 Nu Commercial numeracy | Market, Sales & Negotiation | Mark-up and margin tested before authority is granted; the price engine set to target margin, not mark-up. |
| Authority | 40 Dd Deal desk and negotiation governance | Market, Sales & Negotiation | A small expert desk for complex and multi-branch quotes, same-day on standard deals, every decision logged. |
| Authority | 39 Ka Key-account negotiation plans | Market, Sales & Negotiation | A written opening, target and walk-away for each major account, set once across both countries. |
Ten further elements are depended on and are outlined in Figure 1: 06 Ws Written pricing strategy and 23 Pn Pricing council, which give the rules an owner; 44 Or Override and discount analysis, which tests whether sellers or standard prices cause the loss; 51 Dt Discount structure and tiers, which sets the bands the product tiers sit in; 10 Pp Pricing power, which tiers the increase; 15 Va Value-based agreements and 16 Rb Rebate and incentive design, which tie a concession to a commitment; 38 Pv Price-increase negotiation and 35 Wa Walk-away and alternatives, which carry the increase into the meeting; and 28 Cc Commercial capability and training, which keeps the method in the business after the project team leaves.
The client cases map onto these elements directly. Farmlands built 55 Tn through integrated margin, 61 Da and 44 Or through three floors of authority and reason codes, and 40 Dd through a trading and quote desk. Mitre 10 New Zealand's recommendations start with 06 Ws, one published trade pricing strategy, and 51 Dt, customer discounts set by spend in place of static matrices. SIMCRO built 03 Vq and 15 Va, Devro built 03 Vq and 05 Dr into a production audit and carried them into 38 Pv, and the foodservice packaging distributor's New Zealand team used 39 Ka to realise 8 per cent on one account.
A worked example, illustrative throughout. A New Zealand distributor turns over NZ$60 million at a 28 per cent gross margin, so cost of goods is NZ$43.2 million, and 60 per cent of that cost, NZ$25.9 million, is invoiced in foreign currency. A 10 per cent fall in the New Zealand dollar, with no hedging, raises the cost of goods by about NZ$2.6 million, or 6 per cent. Left unrecovered, gross margin falls from NZ$16.8 million to NZ$14.2 million, from 28.0 to 23.7 per cent of sales. Recovering the dollars needs a price rise of about 4.3 per cent across the book at constant volume, the cost rise multiplied by the cost share of price, 6 per cent of 72 per cent. Holding the margin rate at 28 per cent needs the full 6 per cent. Under a pricing power model the increase is tiered: harvest accounts take the full 6 per cent, protect accounts 4.3 per cent, monitor and risk accounts less, with the shortfall made up on lines imports cannot match. None of these figures describes a client.
Illustrative only: a NZ$60 million distributor with 60 per cent of cost of goods in foreign currency and no hedging. The two percentage rows are drawn to a separate scale. The figures describe no client and should not be read as typical.
09The sequence
Diagnose before designing. The first piece of work is the twelve-month invoice comparison, customer by customer and product by product, with the price-volume test that separates earned differences from negotiated ones, a count of every special price without an end date, a list of every route by which a price can be changed without approval, and a register of every rebate and supplier-funding arrangement in force. Alongside it goes the exposure list: the five largest cost exposures, including currency, with the share of each that current prices recover. Finance agrees the baseline before anything moves.
Write the rules on the evidence. The pass-through rule, the competitor response grid, the discretion tiers by product group and the floors are set from the dispersion and override analysis, not from a template, and the Pricing Council owns the rule book from this point. True net price and the agreement register go onto the quoting screen. Commercial numeracy is tested before authority is granted, and the quote desk is staffed before the old routes around it are closed.
Build the value case before the increase. For the accounts that carry the book, and for any account that buys in both countries, the value drivers are scored with the customer, compared with the import alternative and written into a key-account plan with an opening, a target and a walk-away signed by the sales director before the meeting. The increase then goes out under the pass-through rule, tiered by pricing power, and increase realisation is measured against the plan on a fixed set of customers and products so that mix and volume do not disguise what reached the invoice.
10Frequently asked questions
Which pricing consultant for manufacturers in New Zealand has published New Zealand results?
Pricing Insight has published four New Zealand case studies: Farmlands, a rural supplies co-operative headquartered in Christchurch, where a diagnostic identified A$3.5m to A$6.2m of EBIT opportunity; Mitre 10 New Zealand, where more than A$10m of margin opportunity was identified across more than 80 stores; SIMCRO, a Hamilton manufacturer of animal-health delivery systems, where a customer-value-led pricing strategy was built for a private equity owner; and Devro, which negotiated higher price increases in Australia and New Zealand on proven customer value, a realised result. The Farmlands and Mitre 10 figures are identified opportunities, not realised gains.
What does a pricing consultant for manufacturers in New Zealand do first?
Read twelve months of invoices customer by customer and product by product, measure dispersion and overrides, count the special prices without an end date, register every rebate and supplier-funding arrangement, and list the cost exposures, including currency, with the share of each that current prices recover. The opportunity is then sized against a baseline finance accepts, and each figure is labelled identified until it has been implemented and measured.
Is pricing strategy different for a New Zealand manufacturer?
The method is the same and four inputs carry more weight: the concentration of the customer base, the share of cost that is imported or priced in foreign currency, the few national co-operatives and chains that make rebates and agreement terms decide the net price, and the customers that buy in both Australia and New Zealand. The faults in the invoice data, dispersion, overrides and specials, are the same on both sides of the Tasman.
How should a New Zealand importer handle a fall in the dollar?
Under a pass-through rule written before the move: a trigger, an owner, a time limit and symmetry. A currency move expected to reverse is recovered by a surcharge; one that has held belongs in the base price with notice. To hold margin dollars, price rises by the cost rise multiplied by the cost share of price; to hold the margin rate, by the full cost rise. The increase is tiered by pricing power rather than spread evenly.
Do the Australian results apply in New Zealand?
As evidence of mechanism, yes; as a benchmark, no. Published Australian results such as Bunzl's A$5.7m EBIT improvement across 18,000 SKUs, a realised result, show what dispersion and override control can be worth in one book of transactions. What a New Zealand business is worth is established from its own invoices, and nothing in this paper should be read as typical or guaranteed.
11How Pricing Insight helps
The starting point is the invoice comparison and the exposure list, not a new price list. Our Strategic EBIT Opportunity & Risk Diagnostic reads twelve months of transactions, tests whether discounts are earned, counts the specials and the override routes, registers the rebates and sizes the opportunity against a baseline finance accepts. Pricing Insight has run more than 160 pricing engagements in Australia, New Zealand, South East Asia, India, the United States and the United Kingdom, and works in New Zealand in person and online. The work then runs in three stages.
Diagnose
Twelve months of invoices compared customer by customer and product by product. Price-volume tests, an override report by person, product and customer, a register of specials and rebates, and the cost exposure list with the share each price recovers. An opportunity register with every figure traceable to the transactions behind it.
Optimise
The pass-through rule, the competitor response grid, discretion tiers, floors and the true net price built from the evidence. The EBITDA Improvement Program produces the customer-product price recommendations, the tiered increase plan and the ERP-ready files, piloted on a category before rollout.
Transform
The Pricing Council constituted and the quote desk running. Sales teams tested on mark-up and margin and trained to hold a value case against an import through Negotiation Training & Value-Based Selling, with the Pricing Capability & Governance program holding the rules in place after the project team leaves.
Across 160+ engagements, price optimisation programs return between 5 and 10 times their cost in year 1.
How much of your cost of goods crosses the border, and how much of it reaches the invoice?
A first conversation establishes how this applies in your business and whether a diagnostic is warranted. 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 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 in Australia, New Zealand, South East Asia, India, the United States and the United Kingdom. He also founded Pricing University, which has trained more than 5,000 executives, and is the author of the Pricing Periodic Table, CXO Edition.
To discuss how this applies to your New Zealand business, contact Ron Wood at info@pricinginsight.com.au or on +61 410 534 099, or visit Pricing Insight.
Farmlands, Mitre 10 New Zealand, SIMCRO and Devro figures and descriptions are as published in Pricing Insight case studies; the Farmlands and Mitre 10 New Zealand figures are identified opportunities, not realised results. The New Zealand rural supplies co-operative, the foodservice packaging distributor and supplier, the steel roofing business, the compostable packaging maker and the door hardware maker are Pricing Insight clients described without identification in the Pricing Periodic Table, CXO Edition, and their figures carry the labels given there: realised, projected or recommended. The NZ$60 million worked example is illustrative and describes no client. Bunzl's figure is as published in the Pricing Insight case study. None of these figures should be read as typical or guaranteed. The Farmlands strategy detail, the Mitre 10 New Zealand staff comments and recommendations, the SIMCRO agreement work and the Devro value research come from Pricing Insight diagnostic and advisory work and the published case studies; staff are quoted by role only, and the Devro production audit example uses sample data.
