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Expanding Margins

By February 14, 2018 No Comments

COLLABORATIVE FOR CUBES™ FINDINGS SHOW RIGHT WAY TO GROW

Increasing sales in a way that also increases margins is not easy for business-to-business (B2B) companies. Often business suppliers and their margins are far lower than their customer-facing counterparts. And at the 100,000-foot level, where CEOs are looking to examine the nancial outcomes of their actions, B2B companies struggle to expand margins even as their sales increase.

B2B clients, unlike retail consumers, often have leverage on pricing. Many B2B clients are larger in size than their suppliers, and purchasing departments can exert substantial pressure when negotiating contracts. The ability of a B2B client to lock prices can also limit a company’s opportunities to expand margins. In ationary pressures can compound this effect.

A disadvantage on pricing is one of the reasons many B2B suppliers nd themselves stuck in the “value trap.” Feeling pressure to improve product performance by adding more and new features, B2B companies see their costs increase. But because of their clients’ leverage on pricing, they are unable to pass on the rising costs, and their margins erode.


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