Unveil Your Total Cost for a Competitive Pricing Advantage
In today’s rapidly evolving business landscape, staying ahead of your competition can be measured in dollars and cents. Accurately pricing products and services is a challenge that often results in lost profits and fierce competition. The lack of a unified approach to analyzing total profit becomes a major obstacle. And the necessary data is often stored in separate technology systems and using different terminology.
Organizations can overcome this challenge using PlaidCloud’s Enterprise Profitability Solution. It unifies heterogeneous transactional data and measures product margins accurately and precisely. Timely visibility into product-level margins enables organizations to price their products competitively and make optimal product portfolio decisions.
Root Problems
Many organizations lack an ongoing, consistent method for measuring product-level gross and net margins across all of their sales. This can result in product pricing and product offering decisions based on inaccurate, incomplete and stale information. The root problems are typically found in the following:
- Absence of a centralized system for master data management (MDM) and globally defined dimensions across the business, such as customer, product and channel.
- Difficulty in accurately calculating a total assignable product cost, including R&D, engineering and distribution components.
- Intercompany transactions creating a spiderweb of cross charges makes calculating the corporate margin of a product feel impossible.
The manpower required to untangle and make sense of all this data is typically unreasonable for any one FTE (or small team) to do on a regular or even one-time basis. This leaves many organizations without visibility into the true delivered cost of their products and services.
Consequences
Simply put, all else being equal, a company lacking accurate and timely product margin information is at a disadvantage vs. competitors who know their costs and margins with greater certainty.
- Suboptimal Pricing Decisions: Without a solid approach to profit analysis, businesses may inadvertently set prices resulting in artificially low or high profit margins. This can lead to the dual risk of winning low-margin business and losing out on higher-margin opportunities.
- Misallocation of Resources: Having no clear view of contributors to the total profit can lead to the misallocation of resources. Businesses may end up investing more time and attention in low-profit products or services while neglecting those that significantly impact the bottom line. This inefficiency can result in a misdirected use of engineering efforts and sub-optimal product portfolio management.
Client Use Case: P&L | Stacked Margin Analysis
Before leveraging PlaidCloud, a client was unable to accurately measure the total margin of many products in their portfolio, resulting in product pricing based on broad generalizations. Any attempt at data-driven pricing analysis was limited to a small subset of high-moving products, with the remainder being priced based on a general gut feeling.
PlaidCloud enabled the company to homogenize heterogeneous source data from multiple ERP instances, unwind a tangled web of intercompany transactions, and apply a consistent cost allocation methodology to contributing costs that were not captured accurately in the MRP. This resulted in a revamped data-driven pricing process rooted in confidence that product costs and margins were accurate.
Unified Profit Analysis With PlaidCloud
Implementing a comprehensive solution that provides a unified approach to profit analysis is key to addressing these root problem challenges. PlaidCloud is that solution:
- Consistency in Cost & Master Data Definitions: PlaidCloud drives consistency in defining costs across all aspects of your business, acting as a Central Data Management repository, vital for making accurate pricing decisions.
- Unification of Source Data: PlaidCloud can source transactional and ledger data from any ERP and from staging areas such as existing data lakes or data warehouses in near real-time. This ensures that stakeholders have access to the most up-to-date information, allowing for timely and informed decision-making.
- Truth at a Useful Level: PlaidCloud provides a complete product and customer-level view of fully loaded costs, margins and revenue. This visibility enables stakeholders, from the CFO to pricing analysts, to make data-driven, strategic and tactical decisions with confidence. Enterprise Profitability Model information is delivered in a way that is easy to consume by teams via included dashboards and reports and shared with an existing BI platform.
By adopting a unified profit analysis approach through PlaidCloud’s Enterprise Profitability Solution, businesses can unlock their full profit potential. They can quickly and precisely make data-driven pricing decisions based on a complete picture of profit, revenue and cost. They can optimize resource allocations and ultimately position themselves as stronger contenders in today’s competitive and ever-changing markets. Start with a conversation. Contact PlaidCloud today >