Thermal Spray pricing part1

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In this post, we will address ideas regarding thermal spray pricing from a competitive stand point. The issue of thermal spray pricing itself will be split into two parts. In the second part we will discuss more specific details. Here though, we will address the competitive nature of the pricing issues dealing with pricing thermal spray jobs. There is many a time an argument that erupts or a strong disagreement that ensues between thermal spray sales teams and the estimators. Needless to say, the goal of the thermal spray sales team is to garner as much business as possible for the thermal spray facility and the goal of the estimating team is to ensure that the pricing provided will definitely meet the costs involved with the application of the thermal spray coating and to add a reasonable profit margin. And both these teams are well meaning in their intentions. Obviously, the sales team does not want to blamed for poor sales and the estimating team does not want to be blamed for mis-quoting jobs. And so, for the most part each team tries to do the best of their ability when it comes to this issue.

Why then is the disagreement and how to effectively solve this dilemma? First things first. While both the estimating and sales teams are interested in doing their individual parts, it must be clear in their minds that the combined overall interests of the thermal spray coatings company exceeds the individual interests to excel. Team work is more important than individual accomplishments. That said, the themal spray estimating department needs to come up with accurate costs for the thermal spray job at hand and then include the profit margins separately under each subheading. The reason I bring this up is because most of the time, each individual item is marked up by a certain amount. For example, if the cost of the thermal spray powder ends up being fifty dollars, lets say; then the powder cost is multiplied by 1.2 and used as sixty dollars. This procedure is continued and at the end there is an overall markup put into the whole job of say thirty percent or so. The marketing department then comes in and says that at this price, they can never sell the job and that the price needs to be in line with what the competition charges.

It is at this point that the marketing and sales team needs to hold the line and understand that if the competition price is lower, then it is acceptable to lower the markup margins but is absolutely unacceptable to price jobs below what the costs are just so you are in line with the competition. In such cases, it is better to lose the thermal spray contract than to get a contract that is guaranteed to lose money. I know of a company that kept playing the game of undercutting all their competitors' prices and they ended up in such financial distress that they first had to sell their beautiful building and then eventually they went bankrupt. This may sound like too big of a disaster, but be it known that if very close watch is not being paid to the estimating and pricing structures and adjustments, then major business failures can result. This area is not to be taken lightly and it is better to have arguments and colorful discussions between the estimating and sales teams rather than end up with a bunch of what we call loser thermal spray orders!

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