OEM Pricing: The Secret to Segmentation Superiority

The spare parts market is becoming increasingly complex and competitive, and considering some OEMs have more than 250,000 numbered parts, it is easy to see why many players lack optimal pricing.??

Many are still using pre-determined categories to guide their product segmentation, often defined in a technical way by engineering or product development teams. As a result, these OEMs fail to take commercial conditions into account in real-time, overlook unique selling points, and leave additional margin potential untapped.??

Segmentation cannot be guided by pre-determined categories alone in 2024. Commercial conditions must be monitored intelligently.

Johan ?stlin, Manager CoE Solution Consulting, Syncron

Set against a backdrop of economic turbulence, frequent supply chain disruptions, and mounting complexity, the ability to segment products intelligently offers an unignorable pricing edge. In this article, we will explore the most effective ways to enhance your approach, the role of technology, and a game-changing solution.??

Keep track of key conditions?

Clearly understanding the market, how you are positioned in it, and the unique attributes of your products is a crucial starting point. For instance, are your products based on your own design? Are you making them? How aggressive are suppliers? It is especially important to understand supplier pricing in different regions, and the number of suppliers selling the parts.??

Monitoring customer needs and the wider competitive landscape is necessary to inform any truly dynamic segmentation strategy. This requires in-depth market analysis to be performed, enabling the OEM to identify demand trends and preferences. Not only should you build an understanding of your own positioning in the market, but it is also valuable to understand the segmentation strategies being leveraged by competitors.??

Double down on differentiators??

A proprietary product made only by you is one example of differentiation, this type is considered captive. A commercial item would be a widely available part, provided by various suppliers and distributors, but these products can still be unique depending on their dimensions and other factors.??

Our own Johan ?stlin, Manager CoE Solution Consulting at Syncron, uses hydraulic cylinders as a useful example. Whether you are selling these cylinders as captive or commercial items, Johan explains that ‘by simply grouping them as one family called “hydraulic cylinders,” you miss out on the chance to highlight the unique value individual parts offer.’??

Build a bespoke structure?

Rather than focusing solely on product hierarchy, conditional matching or segmentation calculations, our experts believe using a mix of all three is optimal. For products integral to your business, the hierarchy approach will be effective, with a value-based pricing method harnessing the key product details.??

The combination of a conditional matching structure and a cost-plus pricing method is best suited to highly captive items, while segmentation calculations are optimal for parts where less ample data is available. By assessing your product lines and using a combination of segmentation structures, you will be equipped to maximise revenue gains with more dynamic pricing.??

Lifecycles, repair types, and lead times?

A detailed understanding the lifecycle position of your products is another way to optimize your segmentation and aftermarket services. With a clear view of a product’s journey from initial development to eventual decline, you can make informed strategic pricing decisions that boost revenue growth.??

As noted earlier in the article, studying the approaches your competitors are taking is an advantage. For instance, knowing the difference between the repair types you offer and those provided by your competitors will help you differentiate your segmentation. Do they offer predictive maintenance? Component-level repairs? If so, what are the conditions? Lead times for aftermarket services often vary between OEMs, meaning that this could be a valuable point of difference.??

Bring it all together with Syncron?

The ideas and strategies outlined above are critical, but optimal results can only be achieved with a solution that can ingest and handle all the necessary data and variables in real-time. As the aftermarket landscape becomes more and more competitive, the ability to drive increased sales value via innovation is separating the leaders from the laggards.??

Syncron Price uses machine learning technology that enables you to achieve intelligent product segmentation. This capability means you can easily inform and define your approach to pricing per category, while gaining actionable, real-time pricing insights. You can use the solution to visualize both market and customer data to select the right price logic, and to significantly reduce your administrative burden.??

We supported the automotive and auto parts leader, Al-Futtaim Automotive, to react more rapidly to market fluctuations by equipping them with Syncron Price. This optimization not only enhanced the client’s approach to pricing overall, but also significantly improved the experience of their customers.

We know that you are trying to transform at scale while managing pricing across massive product portfolios, and our experts have tailored Syncron Price to this task. The solution collates data from across your siloed locations, while also pulling in historical data, giving you a single view of your strategies and performance. By processing this detailed data picture, Syncron Price generates sophisticated strategies and puts you in control.??