Middle Market Company Struggles to Overcome Internal and External Forces to Achieve Price Leverage
Challenge: The company was using a cost-plus pricing strategy to set initial price and essentially held there over the life-cycle of a product, sometimes lowering prices in response to sales trends. Overall, the culture was uncomfortable and risk-adverse to the concept of price increases, was not effective at tracking the product’s true market value and lacked know-how to execute and retain price changes with channel partners and customers.
Project Focus: Pricing including discounts and incentives, gross-to-net leakage, actual market value based on a hierarchy of customer decision-making criteria, and communications.
Agreed Upon Solution:
Price increases to varying degrees were made cross across 70 percent of company’s product offering. Increases were relative to the determined market value
Tiered reseller discount structures were established encompassing volume discounts, deal registration and marketing development funds.
Systems and processes were established to stop gross-to-net price leakage in areas such as cash discounts and freight programs
Significant work was done developing communications and meeting with intermediaries and key customers.
After concluding the project, the company was able to achieve its project goals for net realized prices and EBITDA contribution without slowing sales growth.
For the most part, the names of our consulting clients and their financial results are confidential. We are happy to provide references upon serious inquiries.
Objective: Accelerate EBITDA Growth Through Pricing and Programs
Operational Scope: Product Engineering, Sales Operations, Marketing, Legal, Finance, IT, Intermediaries
Industry: Manufacturing, B2B, Commercial and Medical Grade Equipment
Current G-T-M Model: 2-Step Distribution, Value-Added Resellers
Company: Public Company, Lower Middle Market Division