A major supplier of fastening products including screws and glue among other attachment solutions had widely different profit margins in geographically adjacent markets. Prices were not logical and some unique products with small volumes had lower margins than the most frequently bought products. Furthermore, some of the small resellers had better prices than the largest ones. Prices in the retail market varied quite a bit as well. The pricing process from purchasing, through the channel, all the way out to the price on the market was working poorly.
The company established a pricing process with distinct differentiation parameters, including uniqueness, price point and package size. Through that process, a Recommended Retail Price (RRP) was set for each individual product number. In addition, an incentive-based discount model for resellers was developed, connecting the reseller’s effort and performance to prices received.
Many years ago, Falu Rödfärg manufactured paint pigment and sold it to other companies. Those companies then used the pigment to produce and sell the paint “Falu Rödfärg” to retailers. Retailers typically priced the paint to be a loss leader, expecting that doing so would generate incremental business. Falu Rödfärg had no control over the retailer pricing strategy or how the final product was handled in the stores. This resulted in downward pressure on what companies would pay Falu Rödfärg for their paint pigment, leading to a decline in the profitability of Falu Rödfärg.
Rather than letting other companies produce the paint, Falu Rödfärg began to manufacture the paint themselves. With help from PriceGain, they designed a new pricing strategy that better reflected the quality of the product and the brand promise. Their goal was to gain more control of the handling and pricing of the end product, through direct sales as well as sales to both specialized and hardware stores. Through a more profitable pricing model, the distributors incentive to charge the right price for the products value, increased.
Not only did Falu Rödfärg sales volume increase, but it also did so at a higher price margin. Falu Rödfärg became a more profitable company with a stronger brand name. In addition, the collaboration between Falu Rödfärg and its distributors improved.
Residential construction companies are generally well positioned with their pricing strategies. There is a lot of knowledge of key value drivers which leads to prices that reflect the market’s general willingness to pay. Therefore, the opportunity lies in optimizing business results by an even more precise match between the prices set and the willingness to pay for each individual apartment.
Combining extensive consumer research with an optimization allowing all prices to vary simultaneously, including an analysis of cannibalization, business results were optimized as a function of the prices and the expected number of consumers interested in each apartment. By setting the prices accordingly, the revenue increased by 5% without impacting the sales pace of the apartments.
The Staffing Company used a cost-plus price method since it was founded. The hourly rates were differentiated only by profession and were not based on qualifications or experience. The company made the same margins regardless of workload or service level. Nor did The Staffing Company consider the size of the customer when setting its price margins. They had no established method for increasing margins for providing additional services, which often resulted in providing such services at no additional cost. A new pricing strategy was necessary.
After an exhaustive analysis of the company’s transactional data and the customers’ buying behaviors, it was clear that that there were many opportunities to capitalize on. Customers were willing to pay more for value-added services as well as for more qualified people. With this knowledge, we developed a differentiated pricing strategy based on several dimensions. For example, the new strategy considered the size of the assignment and the annual volume of business from each customer. We also developed a customized pricing tool that the sales staff could easily use to produce profitable quotes. This solution helped eliminate critical sources of revenue leakage.
Over the last 10 years, the leading Swedish media company MittMedia has lost 20 percent of its print circulation. To reverse this negative trend and return to profitability, MittMedia had to develop a new digital pricing strategy. The company adopted a strategic goal that focused on the new digital strategy, which will come out as the company’s core business by 2020.
PriceGain worked with MittMedia to develop a new digital strategy based on its customers’ preferences and willingness to pay. The work itself involved a quantitative analysis that resulted in new subscription packages with digital and print content, targeted to different subscriber segments. With these new offerings and prices, MittMedia is well positioned to capture the customers’ preference-shift from print to digital as the market continues to evolve.
A major gym chain with a strong brand faced challenges from low cost competitors and from a market demand that was inhomogeneous. Sales were not performing according to set objectives and churn rates were too high. Prospective customers were typically offered an all-inclusive membership with little variation, resulting in all customers paying the same rate regardless of needs and preferences.
Through quantitative research, the value parameters were identified and the differences in needs and preferences between different consumers were uncovered. A new modular value proposition was developed, and business results were optimized through an advanced optimization of profit, volume and revenue. Revenue and profits increased along with customer satisfaction as prospective customers could better match their membership to meet their gym service preferences.
Depending on whom you ask, the paper magazine has never been as affordable, or as expensive as today. Changed media habits and new distribution channels allow, and require, more personalized pricing and packaging leveraging a wide variety of digital options and combinations.
With the development of a new digital strategy, VK realized that there is a need to understand how their customers want to consume content.
VK introduced a new product structure, offering more options and allowing customers greater choice and flexibility to consume news, regardless of platform. The new structure and prices were developed using PriceGain’s Price Optimization analytics. Prices are based on an estimate of a readers’ “valuation” of consuming news in a particular manner, given price and cross price elasticity for all selectable product options.
VK managed to successfully package its offering and prices to increase profitability and reduce free reading.
Car-o-liner (COL) produces alignment bench systems for cars that need repairs as a result of a collision. Prior to selling COL, Polaris Equity Partners worked with COL to identify various opportunities that could improve COL’s pricing strategy. The primary improvement area identified was the pricing channel between COL and their distributors. The distributors had few incentives to perform better and were not consistently satisfied with COL’s pricing strategy.
With the support of PriceGain, COL developed and implemented an incentive-based pricing channel strategy that improved the relationship with the distributors and significantly increased both revenue and profitability. The pilot implementation in the US market improved gross margin by 36% while concurrently increasing volume. The improvement greatly benefited Polaris as it generated a higher ROI when divesting the company.
The company had a broad offering, ranging from doors to services and support, and was one of the strongest brands in the market. However, customers used prices offered by low cost manufacturers when comparing prices on doors and used small local low-cost service companies when comparing prices for services. Such benchmarking resulted in customers developing low “anchor” prices and put downward pressure on the company’s products and services.
The company developed a pricing strategy that linked the door pricing to service and support pricing, making it evident for the customers that buying from a full range provider is more beneficial compared to buying from the supplier with the lowest price on the individual parts of the solution. This made it more difficult for customers to use artificially low prices for reference points. As a result of this development, the company regained their previous competitive edge within the market.
The company offered three services to the music industry: free, entry level and advanced. The objective was to grow quickly but at the same time become cash flow positive as soon as possible, in order to sell the company at a high price.
Analyzing the company’s pricing and the distribution to current subscribers, PriceGain determined that a more expensive and more advanced premium service should be offered. As a result, many customers who were previously subscribing to the advanced service, migrated to the new premium service. In addition, many customers previously subscribing to the entry level service migrated to the advanced package, as their relative preferences and valuations of the different services were transformed by the addition of a fourth option.
The company had started its digital transformation several years earlier and had managed to transform its income from mainly hardware to a combination of hardware, software licenses and services. The company went from a perpetual income to a significant share of recurring revenue. However, even with these additional products, the company’s growth was stagnant.
The company developed a global pricing strategy comprised of a new modular value proposition, recommended retail prices (RRP), a new partner discount model, a standardized training system, and both support and tactical pricing initiatives that could better support the company’s effort to complete the digital transformation they had envisioned and to achieve the growth they desired.
During an analysis of the pricing strategy and tactics of a building materials retailer, several significant revenue leaks were identified. Prices were initially based on costs but the sales team had the power to revise prices. The revenue leakage identified was larger than the expected profit. More than half of the potential profit was “going out the window”.
Both tactical and strategic pricing opportunities were addressed. The tactical opportunities related to discounting, margins on products with low frequency, psychological price points, freight, warehousing services, unique customer orders and several additional leakage points representing a potential of 6 percent of the turnover. The pricing strategy developed ensured long term sustainable growth and profits turning pricing from cost plus to a value driven price differentiation based on customer needs and preferences.
This train operator had a very static pricing structure due to regulatory constraints. To remain competitive with other means of transportation, it was necessary for this train operator to revise its offerings and pricing strategy.
The company took an outside-in approach to pricing and surveyed the willingness to pay of its customers for their new offerings in addition to the existing options. This allowed the operator to adjust prices for some existing offerings and also introduce new offerings that could be sold without regulatory constraints as alternatives to the regulated products.
A global premium supplier of printer supplies planned to launch a low-cost alternative in the Russian market. The supplier had suffered volume losses to local low-cost brands and wanted to regain market share.
After a price optimization analysis, it became evident that the new low-cost alternative would primarily cannibalize on the suppliers own premium product volumes rather than regaining volumes lost to the local suppliers. Subsequently, the company saved millions by avoiding the development costs for the new low-cost product.
Two suppliers whose offerings complemented each other merged. They had significantly different pricing strategies, one maintaining high base prices and high discounts while the other had market-level prices and lower discounts. To ensure that the potential profitability improvements from the merger were realized, it was necessary to harmonize both the base prices and the discount structure.
The merged company developed a new pricing strategy for the base prices and discounts. Base prices were set in line with market prices whilst capturing possibilities to maintain higher margins, where possible, based on product characteristics. As base prices were closer to market prices, a new discount structure was developed and implemented so that margins were maintained. The new discount structure ensures that the discount given reflects the value of the product to the customer.
The need to optimize workflow management in workshops for vehicles is well known. Work-station utilization rates are typically lower than desired due to inefficient processing methods. The company developed a Software-as-a-Service (SaaS) solution that enabled increasing utilization while simultaneously optimizing the workforce. A problem emerged when the company was unsure how to charge for the solution, especially as customers ranged from single workshops to large chains of workshops owned by the OEMs. A traditional monthly license fee, such as for on-premise solutions, was not viable and would not give the desired business results.
Through market research and customer interviews the value drivers were identified. The solution was two alternative pricing models, one that larger OEMs would prefer and another that was tailored towards small chains and single workshops. The parameters that had the highest value were impact on workforce costs, throughput number of vehicles, remote management capabilities in addition to support and consulting services. The solution was a combination of a lower annual license fees and options priced as a function of the value delivered.