Increasing prices -- not so obviously

Increasing prices -- not so obviously - September 18, 2002...

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September 18, 2002 PAGE ONE Amid Weak Inflation, Firms Turn Creative to Boost Prices By TIMOTHY AEPPEL Staff Reporter of THE WALL STREET JOURNAL Inside the walls of American industrial companies, something unusual is going on: an all-out search for new ways to charge more money without raising prices. Goodyear Tire & Rubber Co. has chopped discounts to its biggest distributors, which had been taking advantage of favorable prices to undercut Goodyear elsewhere. Jergens Inc., a Cleveland industrial parts maker, has started charging big premiums for small orders of fasteners that it used to price like larger orders. Union Pacific Corp. has started charging itsrail-freight customers as much as 40% extra for faster delivery. Low inflation and fierce global competition are huge barriers to price increases. But in a weak economy, many companies have already jumped through hoops to cut costs and boost productivity. So now they need to find new ways to wring more money from their customers. For many industrial companies, there's some room to maneuver because they haven't looked at pricing this way before. Their businesses have run on bulk rates charged for commodities -- some of them measured by weight -- with big discounts for big volumes. Many are used to seeing prices go down over time, not up. Delicate Crossroads The quest for ways to reverse that trend has broad implications. The U.S. economy is at a delicate crossroads, recovering weakly as consumers spend big but businesses don't. Higher prices could give businesses a boost they need to get their own spending back in gear. Finding creative ways to increase prices is a more familiar tactic of consumer-product companies. Kimberly-Clark Corp. next month will start selling fewer diapers in a pack while cutting the price less, resulting in a net 5% price increase. The justification: The diapers will have stretchy material all over, not just up the
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sides. General Motors Corp. will charge extra for antilock brakes in some of its 2003 cars, instead of including them at no charge. Now that kind of thinking is showing up at companies such as Jergens, the Cleveland industrial-equipment company. In July, an aerospace parts maker ordered 500 of the company's 2-inch metal locating fasteners, which are used to hold things such as metal parts in position on factory cutting or assembly machines. The customer also asked for 10 1-3/4-inch versions. Jergens president Jack Schron says in the past he would have swallowed any extra cost of making the odd-size fasteners, selling all 510 at the same price to win customer loyalty. Not anymore. Instead, he calculated precisely the cost of making the 10 odd-size
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Increasing prices -- not so obviously - September 18, 2002...

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