The evolution of pricing in manufacturing — and what’s next
For most of the past century, pricing in manufacturing has followed a simple and linear model: Cost of production + margin = price.
This approach made sense in a world of stable supply chains, predictable costs, and less transparency. It prioritized internal efficiency over external value. But it also left a lot of untapped profit potential — pricing was often treated as an operational decision, not a strategic one.
As global competition intensified, especially from low-cost producers, manufacturers relied on volume and scale rather than differentiated pricing. Price became a weapon of competition, not a lever for growth.
The rise of value-based and segment-driven pricing.
In the 2010s, many industrial players began to shift away from purely cost-driven pricing. Global supply chain shocks, raw material volatility, and customer diversification forced pricing teams to become more analytical.
Leading manufacturers started to:
Segment customers more precisely based on value, willingness to pay, and strategic importance.
Build pricing corridors and guardrails instead of fixed lists.
Link pricing to performance, quality, and lead time rather than just product specs.
This marked a fundamental mindset shift: from pricing as a result of cost, to pricing as a reflection of customer value.
Inflation and cost volatility forced pricing maturity.
The past five years have been a crash course in pricing discipline for manufacturing. Energy shocks, raw material spikes, and logistics disruptions made cost-plus pricing unsustainable. Companies that had underinvested in pricing suddenly had to build real pricing capabilities:
Shorter price review cycles (quarterly or monthly, instead of annual).
Automated indexation models tied to key input factors.
Transparent surcharge mechanisms (e.g., energy, freight, steel indexes).
This has driven a more professionalized approach to pricing in an industry that historically moved slowly.
From product to solution: servitization and subscription models.
Another major trend: manufacturing is becoming more
like SaaS.
Instead of selling only machines, components, or spare parts, more companies
are selling outcomes: uptime, performance, efficiency.
This servitization trend brings new pricing models:
Subscription or “power-by-the-hour” contracts.
Performance-based pricing tied to productivity or availability.
Hybrid models combining fixed fees with variable components.
This doesn’t just change revenue models — it transforms the customer relationship. Pricing becomes more dynamic, value-linked, and long-term.
Pricing technology and data catching up.
Historically, many manufacturers have managed pricing in spreadsheets and ERP tables. That’s changing fast. Pricing platforms, CPQ systems, and AI-driven optimization tools are enabling:
Granular segmentation of customers and products.
Dynamic list management with real-time cost and market data.
Automated discount controls and margin optimization.
Predictive pricing strategies based on market signals.
Digitalization is leveling the playing field between manufacturing and more digitally native industries.
Inflation becomes structured — not improvised
Just like in SaaS, inflationary pricing is becoming formalized in manufacturing. Instead of “negotiating every increase,” many companies:
Build automatic adjustment clauses into contracts.
Use surcharges that follow external indexes (e.g., energy, steel, shipping).
Communicate increases through structured narratives tied to real cost factors.
The companies that manage inflation proactively preserve margins better and avoid desperate discounting later.
Emerging trends shaping the future
The next 5–10 years of pricing in manufacturing will
be defined by a shift from static, backward-looking pricing to real-time,
forward-looking pricing strategies.
Here are some
signals:
Dynamic market-linked pricing — adjusting prices daily or weekly based on input costs, capacity, and demand.
Outcome-based pricing models — more service and performance-based revenue streams.
Data-driven segmentation at scale — pricing tailored to each customer and region.
AI- and ML-supported pricing engines — predicting willingness to pay, elasticity, and margin impact.
Sustainability-linked pricing — charging premiums for low-carbon, certified, or circular products.
What this means for pricing leaders
For pricing teams in manufacturing, the implications are clear:
Move from reactive cost-plus to strategic, value-driven pricing.
Build faster and more transparent inflation mechanisms.
Invest in digital pricing infrastructure.
Link pricing more directly to customer outcomes and competitive positioning.
Pricing is no longer a back-office function.
For decades, pricing in manufacturing was buried deep
inside finance or sales support. Now it’s becoming a board-level lever.
The winners will be those who treat pricing as strategy, not administration —
using it to protect margins, drive growth, and shape the market.
Author: "Mr Pricing", Tobias Murray, CEO and Co-founder at VAERG vaerg.com
About the author. Tobias Murray helps B2B companies turn pricing into a scalable growth engine. With long-standing experience across industries, he specializes in structured, data-driven pricing strategies that consistently deliver 10–25% EBITDA uplift. As CEO of VAERG, he and his team transform fragmented pricing into a systematic, value-generating discipline.