Costing Analysis, Expense Reduction, and Pricing Strategy

This service is introduced by JBA & Partners to help the clients undertake proper costing of their products and services to avoid losses that lead to business distress and failure. 

Through proper processes and procedures, JBA & Partners help companies apply the proper costing methods to enhance financial performance and boost competitiveness.

The service benefits are mainly represented by:

1. Identify cost-saving opportunities.

2. Calculate the exact cost of a product or service.

3. Assist in developing a pricing strategy that takes into consideration the competition, costs, and customers' perceptions and allows for making profits.

4. Assist in assessing the working capital requirements needed for implementing the cost reduction plans and prepare the business plan file that would be submitted to the bank for financing.

JBA & Partners can also help its customers reduce the cost of loan financing (i.e. interest) by preparing the financial plan file that would be submitted to the bank for loan restructuring. The file will include the complete budget and cash flow that incorporate the pricing strategy and cost reduction plan including a loan restructuring proposal with lower interest that allows the company to restore its financial health and the ability to settle its financial obligations on time. 

There is a direct relation between product pricing and product cost. A right pricing strategy doesn’t mean offering the products or services at the lowest price; as such, JBA & Partners also help its clients to create a good and competitive pricing strategy that they apply to their services or products while considering the industry’s specifics, business challenges, market demand, competition, and most importantly the cost.

As required, JBA & Partner also assists its clients in evaluating the introduction of new products or services while considering the costs and availability of all the required resources to avoid putting the organization at unnecessary risk while evaluating the expected financial results before launching a new product or service.

The Cost Reduction

Cost reduction is the process of permanently reducing and optimizing the costs and expenses of manufacturing products or rendering services without affecting the quality. 

Ensuring cost reduction is vital to improve financial management. By analyzing costs and reducing unnecessary expenses, the business will become more efficient, able to apply a better pricing strategy, and achieve more robust financial results and profitability while maintaining the highest quality of the products.

The cost reduction initiatives and methodologies differ between one company and another based on multiple factors; the cost reduction process should be realistic, supportive, and with a clear strategy and objective. 

As an experienced consultant, JBA & Partners is capable of sharing its experience with helping and guiding its customers to reduce costs and achieve financial sustainability which would be achieved by a special framework and cost reduction plan. 

Our cost reduction process helps in identifying and eliminating excessive expenditures that reduce production efficiency and profitability; our cost reduction process follows these 4 steps:

1. Setting the cost reduction scope (discovery stage): We start by analyzing the detailed breakdown of the existing cost structure of your business into various categories and compare them against industry standards and similar businesses (benchmark) to identify and prioritize the areas of cost reduction.

2. Perform Cost Analysis: After establishing the areas for improvement, we perform a detailed analysis by using different quantitative and qualitative techniques to decide on the most appropriate cost reduction technique along with its possible impact. The analysis will include the process of cost mapping that involves listing and analyzing all costs, identifying the strategic costs and their effectiveness/financial return, comprehending how the business is currently allocating its resources, and identifying the hotspot of cost savings potential areas and opportunities. 

3. Establish the Cost Reduction Plan: We prepare the cost implementation plan and involve the concerned personnel (management, head of departments, etc.) to ensure there is a clear separation and definition of roles and responsibilities. The plan will take into consideration the most selling/least selling products or services, the credit policies, supply chain/procurement with payment terms, the possibility of adding new products or services based on unutilized capacities, entering new markets or segments, inventory controls and warehousing inventory/management, etc.

4. Implementation of the Plan: The implementation plan will cover the details of each cost reduction action including the proposed timeline, actions to be taken, and monitoring methodology; it will also include the implementation priorities (based on the effect on the financials/KPIs), the guidelines and the responsible stakeholders (i.e. the responsibility of each department). The plan will be supported with a financial model (monthly budget) that includes the KPIs objective that needs to be achieved after implementation.

The Pricing Strategy 

JBA & Partners helps its clients to have an appropriate pricing strategy that takes into consideration the demand, competition, financial attributes including fixed and variable costs, and customers' perceived value along with the positioning of the brand.

The Consultant will undertake the necessary research and analysis to recommend the proper pricing strategy for the products or services which can be one or a mixture of the following most popular pricing strategies:

Premium Pricing Strategy: This is where the company can charge higher prices due to the uniqueness and higher quality of its products or services service compared to what the competitors are offering.

Market Penetration Pricing Strategy: It is one of the most common pricing strategies, especially for new products or startups; setting lower prices allows the company to penetrate the market and achieve a market share market share quickly and more efficiently. 

Competitive Pricing Strategy: The company will match the prices set by the competitors; however, this strategy will ignore the uniqueness of the offered products or services which requires preparing a price-quality matrix to adjust the prices accordingly.

Cost-Plus Pricing Strategy: The cost of the product is calculated and a preset margin is added to generate profit. 

Value-Based Pricing Strategy: The company’s price is driven by its customers’ perceived value of the offered products or services and it allows adding a premium to the prices.

Package or bundle Pricing Strategy: Multiple products are sold together with a single price making the cost lower to the customers compared to buying each of them individually.