From Product Classification to Pricing Precision

For most manufacturers, every service part already has a place in the product hierarchy. Screws sit with screws. Filters with filters. Body panels with body panels.

That classification supports everything from production and warehouse management to administration and ERP processes. But there is a problem when the same structure becomes the basis for pricing: products that look similar from a technical or operational perspective can behave very differently in the market.

And when they do, applying the same pricing strategy to both can leave an OEM either uncompetitive or leaving margin on the table.

Same Category, Very Different Market

Take something as simple as a screw.

A standardized screw is manufactured to defined technical specifications. The dimensions, material, and other characteristics are common across suppliers, making equivalent products readily available from multiple sources. From a pricing perspective, it behaves much like a commodity. Customers have alternatives, and price matters.

Now consider a highly specialized screw designed for a particular engine or application. Technically, it is still a screw and may sit in exactly the same ERP product category. Commercially, the situation is very different. Its specifications may be unique, its application highly specific, and alternative sources limited.

The first part calls for a competitive pricing strategy. The second supports a much more value-oriented approach.

This distinction extends far beyond fasteners. A body panel for a high-volume vehicle, for example, may face significant competition from independent replacement-part manufacturers. The equivalent part for a low-volume or specialist vehicle may have considerably fewer alternatives.

In each case, the physical characteristics of the product tell only part of the pricing story. The way the market buys and values it provides another important signal.

The Cost of a One-Size-Fits-All Strategy

Most OEM product classifications were never designed specifically for pricing. They serve multiple functions across the organization and are typically maintained centrally in the ERP.

Pricing teams therefore inherit a structure created for broader operational purposes.

If each category is then assigned a common pricing strategy, competitive parts can become too expensive relative to readily available alternatives, putting volume and market share at risk. More specialized or price-insensitive parts can remain too cheap, effectively giving away the premium customers would have been willing to pay.

While experienced pricing teams often recognize those differences, the challenge is translating that knowledge into a workable strategy across tens or hundreds of thousands of individual parts.

In theory, a team could examine each product, determine how it behaves in the market, and apply the appropriate pricing logic manually. In practice, the time and effort required quickly become prohibitive.

The result is compromise: broader segments, fewer differentiated strategies, and prices that are good enough for the portfolio as a whole rather than optimized for the individual market dynamics within it.

At scale, even small improvements in pricing can translate into millions in additional revenue. As a general indication, improvements in pricing strategy can influence revenue by around 2–3%. For an aftermarket business generating €100 million, that represents €2–3 million; at €1 billion, the potential impact becomes considerably larger.

Build Segmentation Around Pricing Behavior

The answer is to leave the ERP classification as it is and build a separate pricing segmentation around how parts actually behave in the market.

Instead of asking only what kind of product is this?, the pricing team can examine characteristics that indicate how the product behaves commercially and group parts that warrant a similar pricing strategy.

That does not mean rebuilding the entire product hierarchy. Most existing classifications will continue to make sense. The opportunity comes from identifying areas where greater differentiation can improve the outcome.

One Syncron customer, for example, created a segment it calls “silent movers”: relatively low-priced products where changes in price had little observable effect on sales volumes. By identifying those products as a distinct behavioral group, the company could test incremental price increases and monitor the sales response rather than allowing their existing product classification to dictate the strategy.

Where Automation Changes the Equation

Greater segmentation only creates value if the organization can manage the additional complexity.

This is where automation becomes critical.

Once pricing-specific segments and strategies are established, Syncron Price can handle much of the calculation required to execute them at scale. Changes to costs, rules, or segment assignments can flow through to the relevant prices automatically, allowing teams to make more differentiations across the portfolio without creating the equivalent increase in manual work.

Syncron can also support the segmentation process itself. Pricing teams can use multiple product parameters and attributes to identify appropriate groups, while new products entering from the ERP can be assigned to the most relevant pricing segment without changing the company's underlying product classification.

The result is more time for the work that still requires pricing expertise: understanding market behavior, determining the right strategy, evaluating its performance, and deciding where further adjustment is worthwhile.

Test the Impact Before Changing the Price

Greater granularity also requires pricing teams to understand the aggregate effect of all those individual decisions.

Syncron Price's price curve optimization capabilities allow teams to test new pricing logic against existing prices and use sales data to simulate the potential impact on revenue and profit. Different changes can then be consolidated to understand their overall effect before new prices are put into market.

That creates a more iterative pricing process. Teams can identify a segment, develop a strategy, model the expected result, implement it, and then examine how that segment actually performs.

For organizations managing large aftermarket portfolios, pricing precision does not come from finding a single better formula. It comes from recognizing where products behave differently, applying the appropriate strategy to each, and having the operational capability to keep refining those decisions as the market changes.

The product hierarchy remains essential. Pricing simply needs a view of the portfolio built for a different purpose.

 See how Syncron Price could work across your parts portfolio. Request a demo.