Pricing and Profit: What Can You Learn from UPS’s New CEO?

A recent Wall Street Journal article focused on Carol Tomé, the new head of UPS, and how since June she has made over the company’s business model. (“This UPS CEO Preaches the Power of No”) The pandemic crisis played a huge role in allowing her to do this, as demand for shipping services has soared.

Formerly the CFO of Home Depot, Tomé knows numbers. Using that experience, she has taken a deep dive into scrutinizing contracts and dropping UPS’s least profitable customers. She is raising prices, as she wants the company to be “better, not bigger.” Costs to deliver packages during the pandemic were rising, and volume was skyrocketing. Tomé decided to use the circumstances to have her management team think about their business and the market.

Just before the holidays, she decided to focus on prices, adding surcharges for customers whose shipping had shot up. Then, she extended the move to higher prices. The WSJ gave the example of one customer who was given 30 days to renew a three-year contract at 30% higher rates.

“If the customer isn’t willing to pay and they elect to leave us, then we wish them all the best,” she said.

Formerly, the company chased volume, but now they are picking more profitable deliveries.

As a financial recruiter who has placed CFOs, controllers, and pricing professionals, I have witnessed how powerful a switch in pricing strategy can be and how much it affected the bottom line in my client companies.

Would you be willing to try an audacious move to use pricing to increase profit, as Carol Tomé has done? What are your thoughts?

Feel free to email me at Richard.bond@bondandcompany.com or call or text me at 203-216-0618.

 

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