Case study # pricing and condition models
Constant demands for better prices lead to revenue erosion
A medium-sized machine tool manufacturer gets caught between the price mills of its various distribution channels. Highly specialized technology resellers and end-user tool retailers are demanding ever better prices and terms. This results in ongoing revenue erosion for the company.
The company wants to effectively counteract this development and strengthen its own position in the market. At the same time, measures are to be developed to safeguard earnings on a sustainable basis.
After the core problem, namely the current price and conditions policy, has been defined, an extensive internal analysis takes place. The article structure, customer base, market segmentation and the strength and success factors are put to the test. In the second step, the scope for pricing policy is clarified. With the help of an intensive market and opportunity analysis (360° external image analysis), the current positioning of the company in the market is worked out and competitive profile comparisons are drawn up. Based on this, step three involves the development of the future pricing strategy, the basic system of conditions and the service modules. This is followed by the validation of the new system through discussions with strategically important dealers in order to obtain important feedback before implementation. The launch to market is done through a multi-stage process: internal sales meeting, dealer meeting and personal visits to key dealers.
After 9 months of strategic work and another three months of implementation work to market, the new pricing and conditions system was made effective.
After one year of validity of the new system showed an improvement in returns of 1.2%. The planned return was 0.5%. Geplant waren 0,5%.