Huge Transformation Leading to a Dreamy ROI
With revenue in the hundreds of millions of dollars, it operates more than 40 facilities in North America and employs almost 1500 employees.
The company’s Pricing Director directly contacted Pricefx Account Executive, Vicki Roberts, in the first instance. Pricefx succeeded in winning the deal against stiff competition from Zilliant, Pros and Vendavo, going live in only 9 months despite the impediments of the Covid pandemic.
The Challenge
- Low profitability and Price Governance: Prior to involvement with Pricefx, the company’s main challenges were low profit margin and poor pricing governance. The Sales team was not quoting prices high enough to maintain or increase margins and there was no integrated price approval process. Over the years, the company’s profit margins decreased from an average of 35-40% down to 15 to 20%. Net Margin for some of the products was even as low as 5 to 10%.
- Poor Price Execution: There were frequent inflation-enforced price increases by vendors which the sales team was unable to pass on quickly to the customers due to lack of prevailing knowledge about its impact on margin. Generally, there was 3-6 months of lag time in passing on the vendor price increases. Fragmented and inconsistent pricing processes were another reason for poor price execution. Sales reps were finding it difficult to manually manage thousands or price records in Excel.
- No Price Optimization: Our client’s prices were not optimized, and the Sales team was not sure of the correct price for customers. The client approached Simon Kucher and Partners (SKP) for price optimization. SKP developed a static model in Excel, which initiated positive results, but this model needed to be constantly updated with the changing market scenario. Managing the price updates in Excel through emails made the price change exercise cumbersome, time-consuming and prone to error.
- Poor Analytical Insight: The client lacked a systematic analytical tool for pricing. The sales operations team was not aware of top or bottom performing customers or products. The Sales team was not pricing consistently, giving rise to price variability, doubling-down to a lack of awareness of the impacts of price changes on their revenue or margin.
- Manual rebates: Rebates were maintained manually, taking time and efforts to calculate the rebates in addition to accuracy becoming comprised.
- Disparate pricing systems: Price approval was taking place through the use of Excel and emails. Prices were updated in Excel. Customer insights were unearthed in Sugar CRM and price executions were made in SAP. These disparate systems were not automized and a lack of integration lead to delays in price executions, poor price realization and much manual effort and supervision.
Our Solution
PriceBuilder and QuoteConfigurator: were deployed to automate client’s price lists, customer specific prices, and eCommerce price lists. Automated price approval workflows were established to make pricing fully governable and to allow sales reps to work within the company’s required target margins.
PriceOptimizer: provides statically optimized dynamic prices for price quotes. The market segmentation has been performed scientifically and transparently enabling to price appropriately for each segment. The model can now be refreshed and maintained over time.
PriceAnalyzer: Gives the client the visibility they didn’t previously have to highlight and correct the poor performance of customers, products, and the Sales team. The tool allows for access to accurate future price impacts on revenues and margins.
RebateManager: to automate and execute rebates accurately and timely in one location, bringing awareness and standardization to the rebate processes.
IntegrationManager: to integrate Sugar CRM, Pricefx and SAP in one integrated price setting, price execution and analytics system.
Project Features
- Price Builder with Price Grids for Customer Specific prices and Price Lists for eCommerce
- Pricing for over 100K products and over 25K Sold-To Customers
- Price grids with daily customer specific price changes
- Price grids involving multiple staff and multistage collaboration with automated approval process
- Automated rule-based Price List for e-Commerce
- Quote Configurator
- Quote approval referencing costs-to-serve, historical prices, SKP recommendations and Pricefx price optimization recommendations
- Multiple workflow approval and email notifications for a Sales Team of more than150 Sales reps and managers.
- Sugar CRM integration
- Price Analyzer and Price Optimizer
- 800K prices optimized in Pricefx Price Optimizer annually based on historical transactional records
- 7 Unique and customized dashboards were implemented complete with multiple dash sheets
- Rebates
- Client operates with 4 different types of rebates
Results:
The result of the extensive project with our client was a multi-level transformation and alignment of their product, sales and pricing management systems.
Throughout this process, Pricefx held true to its core values of bringing a fast, flexible solution that is friendly to our clients’ unique needs and ways of doing business.
In addition to establishing processes and tools for price execution, governance, analytics, and optimization, Pricefx has empowered significant profitability improvements for the leading product distributor and fabricator.
Pricefx implemented the robust and customer-centric pricing solution in only 5 months. The fast implementation process paved the road for our client to increase their profitability by over $4 million in the first 6 months of use, facilitating full Return-on-Investment (ROI) in the first-half year. What a success!
Another great result for our client was the unparalleled improvement in the speed and efficiency of their pricing process. The client’s 3-6 months lag time in price updates has become a thing of the past, allowing the pricing team to spend more time and effort on developing pricing strategy, boosting revenue and income to unprecedented heights.