Engineering companies are putting jobs at risk by allowing themselves to be panicked into slashing prices and offering discounts in the hunt for orders, claims consultant Winkler Profitbuilder.
In a report the consultant warns that unnecessarily lowering prices can lead to profit warnings, share price collapses, and ultimately job losses. Senior managers are also deluding themselves that they have the situation under control.
Senior sales executives report that customers are tougher than ever on prices, and expect the situation to worsen. But only 10% of engineering firms have strict controls over prices.
‘Empowering employees to take decisions and offer exemplary customer service is often interpreted as meaning that staff can offer discounts,’ says the survey. Customers can easily bluff companies by telling sales staff that competitors’ prices are lower.
Half the senior managers in large companies believe competitors’ prices are lower than theirs, though this cannot be generally true.
Few senior managers only 8% in engineering check their company’s invoices regularly to ensure unauthorised discounts are not being offered. Over half said that they would easily agree to a special price for a customer if asked by a member of the sales staff. Engineering companies are more likely to agree to a lower price.
The consultant recommends that companies ensure that the importance of the pricing process is recognised at all levels of the organisation. Senior managers should monitor prices and invoices frequently, looking for unauthorised discounts, deals where free extras are included in the sale, and for hidden rebates.
In the survey, 632 of the 1,500 UK executives quizzed were in engineering.