Management Insight: Throw Away BHR’s: Win the Pricing Game
“Throw Away BHR’s: Win the Pricing Game,” Management Insight, Vol.1, No. 2 (Spring 2005)
Most printing companies have little pricing power in today’s competitive market. US government data indicates that printing prices have been stable for several years and have even declined in some industry segments. Most industry economists say that printing prices will remain under intense competitive pressure for the next several years. Graphic communications companies need sound and effective pricing models to defend themselves against powerful competitive forces and win profitable prices in a difficult market. Studies show that pricing is the most powerful profit-enhancing weapon that managers can use on a daily basis. This issue contains the second installment of author G. David Dodd’s in-depth analysis of pricing in the graphic communications industry. In this article, Dodd introduces a new and innovative pricing system known as throughput pricing. He demonstrates that traditional budgeted hourly cost rates often lead managers to make bad pricing decisions because they misrepresent the bottom-line profit impact of pricing decisions. Based on the accounting concepts of Eliyahu M. Goldratt’s Theory of Constraints, Dodd’s throughput pricing system solves the pricing problems associated with traditional BHR’s and enables managers to see the real bottom-line profit impact of their pricing actions. For managers who want to win the pricing game, this is must-have resource.