In the competitive healthcare supply market, understanding and optimizing product costs and margins are critical for maintaining profitability. To succeed, distributors must be strategic in managing costs, pricing, and margins across different products and customer segments. Leveraging advanced tools like AI can significantly enhance these efforts. This post explores key strategies for managing product costs and margins and highlights how to leverage the AI-driven tool, 86 Insights, to take your organization's profitability to the next level.

Understanding and Tracking Product Costs and Margins
Understanding cost structure is crucial for effective margin management, yet it can often be challenging to track. Evaluating margins requires factoring in various elements and aligning them with competitor prices, which adds another layer of complexity.
86 Insights simplifies this by allowing users to upload the default catalog along with the acquisition costs for each product. This centralization provides a clear, detailed view of costs and margins and enables setting accurate pricing and maintaining competitiveness in the market when processing bids.
Analyze Margins by Pricing Tiers
Pricing tiers play a crucial role in shaping profitability. High-tier products may deliver stronger margins, while lower-tier items might drive volume but require careful margin management.
With 86 Insights, users can also upload multiple pricing tiers, each with unique acquisition costs. This enables margin analysis based on these tiers, providing insight into how different pricing strategies affect the bottom line.
For instance, when processing bids, the impact of each tier on margins and gross profit (GP) can be seen in real-time. This detailed view allows for informed decisions about which pricing tiers to adjust for maximum profitability.
Leverage 86 Insights for Customized Cost Management
One of the standout features of 86 Insights is the ability to upload custom acquisition costs for specific customers. This flexibility is particularly valuable when dealing with large clients or contracts where pricing and costs vary from standard offerings.
While processing the bid, custom costs impact margins. With this information, informed decisions can be made about adjusting pricing, assigning a different tier to the customer, or uploading specific formulary prices. This strategic approach helps optimize margins while ensuring competitiveness in the market.
Optimize Pricing Strategy
Pricing strategy plays a crucial role in margin management. With 86 Insights, AI can optimize pricing across different customer segments. Whether dealing with a standard product offering or a custom pricing arrangement, the tool helps ensure that prices are competitive while still protecting margins.
Dynamic Formulary: 86 Insights features dynamic pricing functionality based on market conditions and competitor pricing. This real-time capability allows a quicker response to changes, keeping margins intact and optimized for maximum profitability.
Value-Based Pricing: By understanding the true cost of each product—including custom acquisition costs—products can be priced based on the value they deliver to specific customers, maximizing GP.
Streamline Bid Preparation for Profitability
One of the core use cases in which 86 Insights excels is in bid processing and automation. When preparing a bid for a customer, 86 Insights displays the relevant acquisition costs—whether they’re default, tier-based, or custom—and calculates the margin and gross profit (GP) for each product in real time. This real-time analysis ensures that there is an accurate picture of the profitability of each bid before it’s submitted.
This capability is particularly beneficial when dealing with complex pricing structures. For example, if there are different pricing tiers or custom pricing agreements with certain customers, 86 Insights takes these into account and instantly provides the necessary data to make informed decisions. Instead of manually calculating margins and GP, the tool automates this process, reducing the risk of errors and enabling its customers to focus on strategy rather than number-crunching.
Conclusion
Improving product costs and margins as a healthcare distributor requires a strategic approach that combines a deep understanding of cost structure with the latest technology. Tools like 86 Insights provide real-time visibility into acquisition costs, optimize pricing strategy, and enhance bid processing. By leveraging AI-driven insights, you will be better equipped to navigate the complexities of the healthcare supply market and win more, profitable bids.