Manufacturing environments have always been cost containment and forecasting, and this focus is exacerbated in Engineered to Order (EtO) environments, where costs are more fluid due to product builds and unexpected costs due to customization. As a result of this focus, Pricing Strategies have historically used this cost basis as a means by which to meet financial obligations, rather than focusing on micro-segmenting markets, customer personalization, and the customer experience which engenders customer loyalty.
To make matters worse, in many EtO industries, quote lead times are very long, as the perceived customization leads to coming up with a new recipe on every RFQ. This constant cost builds on every quote are highly inefficient, and stress already strained resources in many cases, thus increasing the chance of error. This error then risks lost quotes, or worse negative manufacture to quote variances.
While CRMs, CPQs and sophisticated Price Engines work great in high transaction environments where historical analysis provides a great foundation, the focus on history and extrapolated value becomes diluted by the lack of historical comparatives in EtO industries. Rather than spending too much time on trying to normalize historical transactions across customer segments, the focus should be placed on understanding the customer perceived value of each underlying component, as well as the value of delivery, testing, field expertise, capacity, lead times, and more. In EtO industries, the market of customers does not change significantly period over period, so focus your conversations on “needs” and quantify comparative value internally with your components and externally with differential competitive innovation.
Per my note above, the market of customers does not change much, so understanding which customers matter most to your competitive advantages, whether product innovation, brand, manufacturing capabilities, etc., is paramount in knowing where to allocate scarce resources when responding to RFQs. This is where understanding “needs” and how your innovation cycle meets those requirements, translates ultimately into customer loyalty. Start with a simple scoring schema, and evolve
There are many other ways to dissect your competitive advantages, and understanding things like logistical advantages is very important, so take the time to understand how each of your operational levers translates into an advantage or disadvantage. Then craft your Pricing Strategy, Processes, and Innovation Cycle to match where you create the best “Fit” for your customers. Product, component, customer, and competitor scoring are great places to start, so you more fully understand where and when to allocate your resources. There is nothing wrong with “budgetary” quotes with Customer / Product combinations that are not the best “Fit” for your value imprint, even in complex EtO environments, as long as your Strategy and Process mitigate any downside risk and still leave room for even a small chance at winning the bid.
There is much to consider in EtO industries, but don’t get so hung up on costs, and product builds that you limit your ability to respond the Customer / Product combinations that are the best “Fit” for your organization. Focus your efforts on micro segmenting your customers and create an innovation that continues to “wow” them, maximizes the customer experience, and cements loyalty.
