Focus Area:
Product Pricing
Case and Problem:
The client, with an expansive product range of over 100 distinct SKUs, had yet to harness the power of product segmentation. This oversight led to underpriced low-velocity products, an area where customers exhibited potential willingness to accommodate higher price points.
Analysis and Actions:
Recognizing the gravity of the situation, our experts intervened:
- Product Pricing Architecture Assessment: We initiated a comprehensive assessment of the client’s existing Product Pricing Architecture, unearthing multiple inefficiencies that were eating into their profitability.
- Emphasis on Product Segmentation: Our recommendation spotlighted the pivotal role of product segmentation. To remedy the client’s oversight, we rolled out an ABCD value-driven portfolio segmentation strategy. This specific approach aimed to spotlight the low-velocity products.
- Value-Driven Segmentation: By embarking on targeted customer-specific market research, we identified critical value drivers that would serve as the foundation for our ABCD segmentation. This nuanced approach unlocked newfound supplier leverage, especially for the “D” category products, enabling the client to assert higher pricing.
Outcome:
Our methodical approach paid dividends:
- Strategized Product Segmentation: With the newly implemented ABCD value-driven portfolio segmentation, the client now had a concrete strategy for each product category.
- Negotiation Prowess: Our segmentation approach equipped the client with a formidable advantage during price negotiations with their prime customers.
- Enhanced Margins and Relationships: The client witnessed a surge in their profit margins, especially for long-tail products. This upswing did not come at the expense of market share or customer rapport. On the contrary, the relationships were further solidified.
Increased Annual Profitability: The fruits of our labor culminated in a noteworthy 15% surge in annual profitability, specifically within the “D” segment of their product portfolio.