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Has Your Company Recently Rationalized Your Prices and Fees?

I read an article in Fortune (10/29/2008) that reminded me again how important it is that companies rationalize their prices and fees during this tough economic time.

Sales people and their managers have enough of a challenge without having to overcome customer objections and competitive pricing pressures because their prices are artificially high or their fees have been calculated on top of the healthy—but perhaps no longer appropriate—margins that we all enjoyed a few years back.

At General Mills, the Holistic Margin Management system has helped them sustain higher margins than their peers.

From the article:

[General Mills CEO Ken] Powell’s team first applied the system to struggling Hamburger Helper. At the time the company sold 50 versions of the product, with 25 pastas ranging from wagon wheels to spirals. Executives researched the costs of producing the different options as well as how much consumers liked them, then eliminated half of them. They excised unimportant spice and cheese pouches. They shrank the size of the box while keeping the serving size the same. The upshot: Hamburger Helper now costs 10% less to make.

I’m using this Hamburger Helper example to make this point:  If you find that your salespeople are losing on price these days, one of the first questions you should ask yourself is, “Can we justify our price in today’s market?”  If the answer is yes, your salespeople need some help, and fast.  If the answer is no, maybe your competition has already figured out that if they win more business at lower margins, they come out ahead.

Photo: Amazon

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