$400M Middle Market Company Struggles to Overcome Internal and External Forces to Achieve Step Change in EBITDA Through Pricing
Challenge: The company historically used cost-plus methodology to set initial price and essentially held there over the life-cycle of a product, sometimes lowering prices in response to competition. Overall, the culture was risk-adverse and uncomfortable with the concept of raising prices. They also struggled to accurately assess the product’s true market value and lacked know-how on working with channel partners and customers to communicate, execute and retain price increases.
Project Focus: Market Value Pricing, Discounts and Incentives, Gross-to-Net Leakage, Stakeholder Communications
Agreed Upon Solution:
Price increases to varying degrees made across 70 percent of company’s SKUs. Increases determined based upon customer perceived value and competitive strength.
Tiered reseller discount structures established encompassing volume discounts, deal registration and marketing development funds.
Systems and processes established to stop gross-to-net price leakage in areas such as cash discounts and freight programs.
Significant amount of focus on developing thoughtful communications, internal and external, 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 with no discernible impact to sales volumes.
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: Increase prices with minimal impact to sales volumes
Operational Scope: Executive Team, Sales, Marketing, Product & Pricing Development, Intermediaries, Customers
Industry: Commercial/Industrial Durable Products, B2B & B2C
Executive Sponsor: Division CEO
Company: Public Company, Middle Market Division