Managers in non-commodity businesses talk about branding, product/service differentiation, pricing strategies, and profitable growth. But their counterparts in commodity businesses talk about cost and volume, and seldom if ever use innovative pricing and marketing approaches. This need not be the case, however. Contrary to conventional wisdom, unexploited pricing and marketing opportunities exist on the order of 5 to 10 percent of return on sales—and they can be captured quickly.

Chasing tonnage

The standard approach to pricing and marketing in commodity businesses is "chasing any tonnage": taking orders irrespective of their profitability or attractiveness. The goal is to fill volume quotas and reach market share targets while passively matching competitors’ prices. This strategy leaves no room for the powerful pricing and marketing levers used by non-commodity businesses—account planning, innovative pricing schemes, customer/ order mix management, and so on. Focusing on volume alone erects a wall between sales/marketing and production. As a result, management loses the ability to distinguish between good and bad orders and to price and manage mix accordingly.

We believe it is possible for commodity businesses to exploit pricing and marketing levers by making true order economics along a company’s entire value chain transparent to decision makers in...