Lifecycle pricing for service parts
Ways to stay on top of the market and ahead of competitors through innovative pricing strategies
Calculating the most appropriate pricing for after-market service parts is a substantially different process from establishing prices for core products. For starters, there's the sheer magnitude of the task. Depending on your industry, tens or even hundreds of thousands of unique stock keeping units (SKUs) must be actively managed at any given time.
Each part has its own cost structure and mean time to failure, and many are bundled with services rather than sold independently, thus increasing the complexity of the pricing process. Plus, although parts frequently make high-margin contributions to your bottom line, the business units responsible for them are typically resource-constrained, and pricing often comes as an afterthought.
Those are just the internal challenges. Companies also face considerable external pressures, including competition from third-party parts manufacturers and the fact that that customer needs—and thus market demand— varies considerably throughout the parts lifecycle.
In this article, we'll discuss the complexities of parts pricing and ways manufacturers have traditionally managed the process. We'll then present the basic components of an effective lifecycle pricing strategy. Finally, we'll make forward-looking recommendations on ways to enact more effective pricing strategies that can help boost revenues over the entire lifecycle of your service parts.