Case Study 1: Company Transformation
Situation: The Company had no pricing resources, pricing was not a priority, volume and share dominated decisions.
Hurdles: The company had many highly divers businesses that each had autonomy for their own strategy and performance. Corporate level initiatives had to influence businesses, with no direct authority, and they were rarely well received.
Actions: Created a corporate level advanced pricing effectiveness team, which operated strictly as advisors and coaches, to 1) lead advanced business by business price setting projects and 2) improve the pricing capability of the company and it’s businesses. This team helped guide the pricing resource structure, training/skill building of marketing, sales and pricing, the pricing processes and systems and the corporate culture.
Results: The decade long margin decline stopped and reversed. Prices improved quarter over quarter for the next 5 plus years. Profits improved 5-15% per year.
Case Study 2: Chemical Example
Situation: This specialty chemical business enjoyed price premiums but these premiums were shrinking as competitors improved their offerings.
Hurdles: Market dynamics were very competitive. Price increases attempts over the previous few years had not been successful. The business, marketing and sales organizations were skeptical about the opportunity to improve price.
Actions: Brought in a few pricing experts and teamed them with resources from the business. Initially, we ran transactional pricing projects per region to identify easy, quick hit opportunities to improve their pricing and their sales/pricing policies. As the business began to have pricing success, we shifted into value pricing. This work included completing deep customer needs-based surveys/interviews followed by creating needs-based customer segments. Different pricing strategies, product/services offerings and pricing policies were developed for each customer segment. We supported the training of the marketing and sales resources as well as the tools for execution.
Results: Marketing and sales pricing capability rose significantly. Over the next several year, the businesses successfully implemented 2-4 price increases a year; some broad based and others targeted to specific market or customer segments.
Case Study 3: Food Industry Example
Situation: A diverse B2B food business was suffering with very low profitability for several years. The new CEO, who had experience the power of pricing to enhance profits in this previous business, felt pricing was a potential lever for fast improvements.
Hurdles: After years of no or low price success and a broadly held believe that the business was already higher priced then competition, the organization was highly skeptical of pricing initiatives.
Actions: Brought in a team of pricing experts and did a rapid, high level analysis of pricing opportunities in transactional, value and strategic pricing to identify quick hit opportunities. Opportunities were identified in all three areas of price across most of the product families. We guided them through the training, internal and external communications and skills needed to implement with confidence.
Results: Profits improved from near zero to $30 million in just over 6 months. We were invited back to run deeper pricing analysis in the following year with similar benefits.
Case Study 4: Pricing in a Recession
Situation: In the 2nd half of 2008, a recession hit globally. This had significant, negative effect on pricing dynamics. The company, and all of its diverse businesses, were experience the rapid drop off of demand.
Hurdles: With businesses facing 20-40% volume decline there was significant pressure to reduce price as a way to make up for the large profit short falls. Further, businesses did not know how to price in a recession. Customers were pushing hard for fast, deep price drops.
Actions: Early in 2008, as the signs for a potential market softening at year end were just beginning to emerge, I urged businesses to accelerate their 2H2008 planned price increases into 1H2008. We then developed training as well as guidance tools on how to price in a downturn (i.e. How do you know when you should drop price, how to determine the extend of the drop and other techniques to minimize the impact of price drops). The training was rolled out to roughly 200 marketing and sales leaders in the United States. Based on the positive feedback, it was quickly rolled out to all the regions.
Results: While many businesses did, appropriately so, need to drop price they were able to minimize the effects. Despite 2 quarters of some price drop, both 2008 and 2009 averaged price increases.