Ivory Consulting’s CEO Scott Thacker provides advice and counsel to equipment lessors on the best ways to improve customer satisfaction and profitability using pricing.
When we last left off, which admittedly was a while ago, I hope I convinced you to put your pricing methods at the core of your strategic plan. Today, we’ll look at how to structure a strategic plan with pricing in key position.
Most strategic plans have three elements at their core: first, increasing shareholder value, second, raising customer satisfaction levels, and finally, enhancing employee engagement. Pricing methods can influence all three of these in different ways.
Increasing shareholder value primarily comes from increased profits and the promise of increased cash flows in the future. In most leasing companies profits are derived by expert execution on the financial products offered. One key element to consider when preparing your strategic plan is deciding which financial products you will offer to which customers.
Once those decisions are made, setting up rules on how to structure each financial product to deliver the highest yield, or return, or profit, is key to a successful outcome. It’s not sufficient to only include the type of financial products you want to offer in your strategic plan. You must also include the various ways of structuring those products. Of course, structuring is all about finding the right combination of lessor yield and market competiveness.
Structuring options can include techniques such as pricing with tax benefits in concert with the tax sharing agreement between the parent and the leasing subsidiary. Other common structuring techniques include:
Next time we’ll look at how pricing can assist in raising customer satisfaction levels. Further down the road we’ll examine the impact of pricing on enhancing employee engagement.