ATLAS COPCO/ EPIROC SPARE PARTS PRICING - 2

Atlas Copco is working towards being market-based but that is not always the case and the market factors are sometimes wrong. They are reporting to the Production Company and states that it is an on-going and continuous process that so far only is a year old. Historically the Scandinavian countries have had their own prices and to add them in a segment where they all have the same price situation is not always correct. 

The biggest challenge with pricing of spare parts for Atlas Copco is setting competitive prices. This is especially true for the parts that are not Atlas Copco designed and unique with a lot of competition. This is because it is important to have the right information about competitors and their offers in a way so that Atlas Copco can understand their market. 

To be competitive and to be able to be market based they collect information that is sent to the production company. This information involves indications from the market and could contain customer complaints. Atlas Copco describes that it is important to understand customers and since the pricing process are new they try to work close with the customers. Sometimes the sales company try to change the prices themselves and investigate how the customers respond but before taking such action they need to communicate with the production company. 

Atlas Copco segments both their customers and their parts. This way you can work with a focus and aim towards a certain group for instance. The biggest customer segment is the rental segment that is constituted of companies that have smaller machines that companies can rent. Atlas Copco has a new pricing process but customers still have their old discounts left. Big customers have big discounts but these are old negotiated discounts and they are trying to create a transparent discount ladder. There is a problematic situation with changing the old discounts. Companies can have verbal or written agreements on their discounts and if you change that it can create a lot of dissatisfaction. The new discount structure should solely be based upon the volume a customer buys. 

There are around 8 segments with parts that are organized dependent upon what type of competition they are facing. It is about what kind of value they bring the customers and how price sensitive the customers are on the specific product. For instance Atlas Copco designed products that are unique are priced with a higher price and a product like filters are priced in a way that is market based. These two types of product are different in the way they compete and must therefore be priced differently. 

Atlas Copco’s USP is that they are a Global company with much competences and big experience. It depends on the product but in general Atlas Copco is not the market leader in Sweden but is considered as a big player on some of the machines they are providing. Atlas Copco has a good aftermarket with good service that aims to serve the machine before it breaks. Sometimes they can offer longer guarantee on the machines if they sell a service contract. 

Besides other brands Atlas Copco experience competition from pirates/will-fitters and on some products there is problem with parallel importers.