While CFO at a pharmaceutical firm I noticed one product that we were losing a lot of money on.  It was the largest tablet in size we produced and was made for a much larger firm in the industry.

Historically our pricing was based on cost plus. However, we had revamped our entire cost accounting system. It turned out, due to the large size of the tablet, that our cost was nearly three times the original cost estimate.

We had to do something. It was no longer a nice to fix but a must fix.

However, looking at it from our perspective only would have mussed the opportunity.

Instead I took a look from the customer side. Fortunately in the industry there was a Red Book publication whirl showed the prices that pharmaceutical firms sold their products for.  It was eye opening. The cost we were charging our customer was only 1% of then selling price. Even of we tripled the selling price to them, it would hardly put a dent in their margins. In other words, this customer had a lot of room.

My boss agreed and let me go ahead and meet with the customer. I walked through the situation with them in the meeting and explained the need for the price increase.  Because I had done my homework, instead of getting tossed out of the room, I walked out with a new price that was three times higher.

The clincher was their closing comment as I was leaving –“we wondered what took your company so long.” My predecessors had missed the boat.

       Our biggest money loser was now a respectably profitable product.
      We could continue to make the product. The customer did not have to find another source. 

One way to improve your company results can be a hard hook at your pricing from the customer perspective. You might find room to move your profits to a higher level.