3M Pricing Spineometer: 4 of 5 Vertebrae

3M, a diversified global manufacturer, technology innovator, and marketer of a wide variety of products and services, had a mixed FY 2024. On an unadjusted basis, revenue on continuing operations was relatively flat, falling 0.1% to $24.6 billion. However, earnings before interest and taxes rose significantly by 145% to $4.8 billion over FY 2023. On an adjusted basis, 3M reports revenue of $23.6 billion, up 1.2% from the prior year with a 21% operating margin.

A review of 3M’s 21 January 2025 earnings call and associated financial reports provided insight regarding the importance of pricing on performance.

While William Brown, CEO of 3M, emphasized growing the top line via selling higher volume, he also alluded to improvements in executing price corridors and changing the pricing process. Overall, he expects prices to increase with inflation but did not provide details.

3M operates with three business segments. Safety and Industrial, Transportation and Electronics, and Consumer.

1. Safety and Industrial is 45% of revenue. It includes abrasives, automotive aftermarket, electrical, adhesives, personal safety, roofing granules, and more.

2. Transportation and Electronics is 34% of revenue. It includes advanced materials, automotive and aerospace, display materials, electronics materials, and more.

3. Consumer is 20% of revenue. It includes construction and home improvement markets, home, health, auto care, stationery and office, and more.

Of the 85,000 professionals employed at 3M, industry benchmarks would suggest 50 to 250 to focus exclusively on pricing. Given the complexity of their business, we would recommend targeting the upper end of the industry benchmarks.

1. Nearly 5% of revenue is spent on research and development (R&D). Pricing professionals can improve investment decisions in new product development before execution and improve launch pricing accuracy via Economic Value to Customer and primary market research efforts.

2. 3M conducts multichannel distribution including direct sales, e-commerce, wholesalers, retailers, jobbers, distributors, and dealers. Pricing professionals can provide decision clarity on price differences between channels according to the value that a channel provides to 3M, the mix of products sold, and the role a channel plays in informing and educating customers moving negotiation decisions beyond a focus on sales volume.

3. 3M sells a wide variety of products and services through these channels. Price guidance for individual transactions should be guided by a price segmentation analysis. This delivers predictive expectations of the goal, expected, and poor price capture from negotiations. These guidelines are dependent on the customer, product, and market segment. They could be made at the invoice and the net (after rebates) level.

4. While 3M has reviewed sales compensation and quotas in the last 12 months, they should consider moving to a profit-based incentive structure, such as using deal quality scores that incorporate not just the revenue, but also the mix and the price capture to price guidance.

5. Some of their products would enable direct measurement of price elasticity of demand, cross elasticity of demand, and other econometrics. These metrics could enable economic price optimization for either profit, revenue, or market share, per the orientation of the company.

6. 3M is a global company with 54% of the revenue earned outside of the U.S. Economic conditions, such as tariffs, recessions, interest rates, inflation, and geopolitical conflicts all impact financial performance. Pricing professionals focused on applied economics could help navigate 3M through these volatile challenges.

7. As a global company, competition and marketing practices would vary across the globe. Pricing professionals co-located in key geographic markets would enable better coordination between sales, marketing, and finance.

8. 3M does engage in mergers and acquisitions along with business separations. Pricing professionals could contribute to these decisions by identifying the pricing potential of a specific target in the market.

Research into the investment of 3M into pricing capabilities yielded encouraging results.

1. The team size was well within the industry norms with over 100 professionals identifying pricing as their main role.

2. Pricing professionals hold titles of leader, specialist, analyst, manager, and director. No vice president of pricing was identified.

3. Most pricing professionals were focused on analysis. This often implies a responsibility to provide actionable price guidance to salespeople for price negotiations. Other responsibilities include that of (1) pricing insights which is likely a market research role for new product pricing and price adjustments, and (2) off-invoice pricing and incentive alignment which is likely a commercial policy and rebate management role.

4. Pricing professionals at 3M were distributed globally aligned with their market footprint.

Given the importance and capability of pricing at 3M as indicated in financial reports, management statements, and our pricing team research, and given their performance, we have come to the following conclusion as of March 2025.

3M Pricing Spineometer: 4 out of 5 Vertebrae. 3M executives have invested in pricing capabilities but there are significant opportunities for improvement and value in elevating pricing to a VP role within each business segment reporting to the president or CEO of that segment.

MMM (3M Company) rose from 140 the day prior to their earnings call to 150 one week later. FY 2024 revenue of $24.6 billion with a 20% operating margin and P/E ratio near 20.

For FY 2024, a 1% improvement in price would yield a 5% improvement in operating profits holding all else constant at 3M.

SIGNY by Wiglaf Pricing, an AI app for multi-SKU business-to-business companies to predict and manage price capture, is now available for trial and purchase. Contact me at tsmith@wiglafpricing.com