10 Mistakes Pricing Managers Should Avoid

Pricing spare parts is a high-stakes game. Get it right, and you unlock a steady stream of revenue while strengthening customer relationships. But getting it wrong can risk losing huge amounts of profit, making customers unhappy and losing market share. Pricing Managers in the machine manufacturing industry have to navigate this increasingly complicated landscape - balancing internal stakeholder expectations, growing margins, and keeping customer relationships intact, all at the same time. Juggling these responsibilities can even cause the most experienced Pricing Managers to fall into common pitfalls.

In this blog, we break down the most common mistakes that could potentially be eating into your margins and give alternate approaches so you can fix them. Whether it's relying too much on cost-plus pricing, neglecting market trends, or failing to automate pricing workflows, these missteps can cost a lot of money. Avoiding them can help you stay competitive and maximize your revenue.

Table of Content:

1. Reliance on Cost-Plus Pricing
2. Communicating Price Changes Ineffectively
3. Overlooking Regional Pricing Differences
4. Treating All Parts the Same
5. Failure to Adjust Pricing Dynamically
6. Poor Data Quality and Lack of Pricing Visibility
7. Ignoring Lead Times and Availability
8. Overlooking High-Value Parts
9. Not Automating Pricing Processes
10. Lack of Competitive Benchmarking
11. Conclusion

1. Reliance on Cost-Plus Pricing 

Many pricing managers are still following the outdated “cost-plus” pricing methods where they simply apply a standard markup on top of incurred costs to determine prices (e.g., cost + X%). This approach ignores market demand, competitor pricing and customer willingness to pay. Sticking to a ‘cost-plus’ pricing strategy causes manufacturers around 20% in lost after sales revenue. 

Better Approach: Leverage more advanced pricing strategies that evaluate competitor prices, market dynamics, and customer willingness to pay to form an end price. This will improve your margins while ensuring you stay competitive in the market. 

2. Communicating Price Changes Ineffectively 

Pricing changes are implemented without a clear rationale that is communicated to distributors, dealers, or customers. They may push back against price increases, assuming they are arbitrary, which can lead to straining the customer relationship or losing their business altogether.  

Better Approach: Use data-backed justifications (e.g., market trends, raw material costs, inflation) and communicate pricing changes transparently and timely

3. Overlooking Regional Pricing Differences 

Setting the same price for a part globally and ignoring local market conditions can lead to underperformance of your portfolios in those countries. It is crucial to take into account the local considerations of each region you intend to operate in. As a result, pricing may be too high in price-sensitive regions and too low in premium markets, affecting sales and profitability. To illustrate just how different it can be, we examined a spare part in our research data, which we researched in four different regions in the first quarter of 2024. We then calculated the median price for each region and converted it to euros using the respective exchange rates.

Better Approach: Implement regional pricing strategies, adjusting for local competition, taxes, import duties, and customer behavior. This will ensure your prices stay competitive globally and not just in your primary markets. 

Learn how to implement regional pricing for your parts in this detailed guide.

4. Treating All Parts the Same 

Managers fail to create bespoke strategies for different types of parts in their portfolio. Applying a one-size-fits-all pricing strategy across the entire portfolio can also lead to lost revenue. As a result, critical, fast-moving parts may be underpriced, while exclusive parts may not reflect their true market value.  

Better Approach: Segment spare parts into competitive vs. exclusive, and apply differentiated pricing strategies based on demand, lifecycle stage, and strategic value. 

5. Failure to Adjust Pricing Dynamically

Many companies update their spare parts pricing annually or quarterly, rather than in real time. This causes prices to remain stagnant, leading to missed margin opportunities when costs or competitor prices fluctuate.  

(Source: Symson - 4 Business Benefits of Dynamic Pricing)

Better Approach: Implement dynamic pricing models that automatically adjust based on market conditions, inflation, and competitor actions. 

6. Poor Data Quality and Lack of Pricing Visibility

Parts data (e.g. historical sales, part segments, and lead times) are often incomplete, outdated, or scattered across multiple systems. This results in a lack of visibility for pricing managers and a low confidence in the accuracy of the data. Missing insights and scattered data make it difficult for managers to make truly informed decisions, leading to pricing inaccuracies. 

Better Approach: Use a pricing intelligence tool to gain more visibility into your own data combined with your competitor’s information in a centralized space so you can make well-informed, confident decisions. 

7. Ignoring Lead Times and Availability

Pricing decisions are made without considering the lead times or availability, or supply chain constraints of parts. Competitor lead times are also not taken into consideration, leading to less competitiveness in delivery times. If a competitor has faster delivery times, customers may prefer them, even at a higher price. Moreover, additional strategic pricing opportunities could be explored based on scarcity of certain parts that may warrant a premium price.  

Better Approach: Factor lead times and part availability into pricing decisions. Scarce parts with long lead times may justify higher pricing to reflect urgency. 

8. Overlooking High-Value Parts

Pricing managers often fail to factor in a part’s strategic or special value when pricing. It could be anything from its role in equipment uptime, reduction of carbon footprint or a technological upgrade. High-value parts are expected to have a premium price and without factoring that in your pricing, you may be leaving money on the table. 

Better Approach: Implement value-based pricing, where price is determined by the part’s importance, uniqueness, and customer impact.

9. Not Automating Pricing Processes

Pricing workflows are often manual, time-consuming, and spreadsheet driven. It can quickly become a nightmare to manage, especially for larger portfolios. Without automation, price updates can be inefficient, delayed, and inconsistent across regions or sales channels. As a result, there is a risk of prices being outdated and divorced from market realities.  

Better Approach: Use pricing solutions that offer automated workflows to update prices efficiently and apply rule-based adjustments.

10. Lack of Competitive Benchmarking

Some managers set prices without comparing them to market benchmarks or competitor prices. Without market insights, they either miss out on revenue opportunities by pricing too low or lose customers by pricing too high. 

Better approach: Use market intelligence solutions to stay on top of market trends and get updated insights into your competitors so you can create a competitive pricing strategy. You can also read more blog articles on our blog which cover various aspects of having a truly competitive pricing strategy.  

Conclusion

For Parts and Pricing Managers in the machine manufacturing industry, avoiding these mistakes can unlock higher margins, boost spare parts sales, and improve customer satisfaction significantly. These mistakes can easily be avoided by following dynamic pricing practices, automation, and market-based pricing strategies. An adequate pricing intelligence tool, like the ones from MARKT-PILOT, will have capabilities to make it super easy to price and manage your parts portfolio following the industry best practices. 

Learn more about the MARKT-PILOT solution here.