Hopefully you caught the front page article in the Wall Street Journal on Tuesday discussing how Parker-Hannifin completely revamped its pricing strategy. While most company use the traditional "cost plus profit" approach, Parker-Hannifin embraced the lean concept of value from the perception of the customer and began to set prices based on the value delivered to the customer. Net income and return on invested capital went up 3x in four years.
I was so busy making copies of this article to send to business colleagues that I never got around to blogging about it. However our friend Mark Graban at the Lean Blog wrote an excellence analysis and discussion of the article.
This is a very important concept for anyone in the lean manufacturing world, especially if you are struggling with conventional pricing models. I encourage you to read Mark’s analysis.