Half-billion dollar global manufacturer of glass and plastics products was experiencing margin compression as prices did not keep pace with inflation. Sales were through distributors, direct sales and OEM components. List prices were changed annually according to “market conditions”, and the sales team had considerable discretion to discount.
SPS created a structured approach for the client to manage list prices and customer-specific discounts using multiple variables to estimate value and price sensitivity by segment. We analyzed multiple years of transactions to identify the segments, customers, and products with the greatest opportunity for price improvement. We also worked with the client to develop and implement tools that were used by product management, sales, and the pricing teams to manage their new processes and to replicate our analytical work in the future.
Price increases met or exceeded the inflation rate in the first two years of the new process, while sales grew at above-market rates. Client calculated 100 basis point improvement from new processes.
“Strategic Pricing Solutions was invaluable in improving our pricing and margins. In the past we tried to spread our target price increases across all business like peanut butter. SPS showed us how to analyze our transaction data and competitive positioning data to determine the segments and products where we had an advantage and could increase prices more.
Our overall results were much better than they had been.” – Global Pricing Director