Background
One of two leaders in a mature market wanted to stop the “race to the ditch” with their key competitor. A decade of price wars and volume swapping resulted in seven years of minimal price and earnings movement.
Action Plan
EMM conducted customer value, cost-to-serve, and waterfall analyses for the company’s top 15 direct accounts to identify pricing leverage points and trade-off opportunities as preparation for annual price reviews. The pricing process leakage and reasons-to-deviate analysis was used to explain variation both internally and externally. EMM segmented each customer’s volume at the plant/end-use market levels, which in turn led to a “bad volume” report for each customer. EMM produced direct account deal structure framework, pricing process, and negotiation protocol for the company. A customer workbook/account plan linked to pricing and margin databases was developed along with a pricing/deal simulator to prepare for cost-for-value trade-off negotiations. Sales was trained on the new tools and, more importantly, trained on the new approach to customers which was about discussing the value they deliver to help them make money or reduce costs.
Results
By developing a program that reversed seven years of little to no price increases, EMM helped the company to achieve average price increase of 3% across 12 of the top 15 accounts with an average of 4% cost-to-serve reduction at the account level. The company also identified three accounts where customer value was being eroded and developed corrective quality and innovation measures to prepare for upcoming negotiations. Changing the customer conversations drove a new era of customer understanding and growth.
