Background
The maker of a high-margin ingredient thought commoditization couldn’t happen to them. For decades, the $5 billion company had grown through acquisitions and increasing price premiums of highly proprietary product lines. But over a five-year period, their commercial teams saw buying power shift from R&D experts to Procurement. Product matching and strategic sourcing agreements suddenly proliferated in a commercial environment once controlled by the customers’ technical people. At annual price reviews, requests for 8-10% price discounts across the board had become the norm. The company was highly concerned and frustrated because these practices were spreading most rapidly among the handful of global accounts through which 60% of the ingredient company’s volume flowed.
Action Plan
EMM began by mapping the value landscape for the company's products in those major accounts, identifying places where they could fulfill unmet needs, differentiate, and innovate. Next, value insights were generated to connect the client’s value creation to the entire product lifecycle for each of their customers. Succeeding with this value-based approach to the customer experience required a consultative selling model, the first of its kind in the industry. EMM helped the company create a value-based major account planning process. The final step in EMM’s approach – developing value branding plans – included an external and internal component. Externally, the organization built relationships with newfound “consumers of value” in brand and category management in customer companies. Internally, the organization embedded value-based capabilities that bridged the gap between global and regional account managers and pricing/costing managers. And through change management, attitudes and behaviors were shifted from “customer advocate” to “value exchange manager.”
Results
The results have been impressive. Working with EMM Group, the company reversed business-wide trends in margin erosion and with the all-important top CPG accounts, who agreed to an average price increase of 6% versus the 10% decrease that was initially demanded of them.
