PRICING AND PERFORMANCE DISCIPLINES

Pricing is a critical lever of value creation, but few companies feel they do it really well. We see pricing excellence as a four-stage journey:

  1. Eliminating the 'leaky bucket' - i.e. failing to price in a way that reflects true cost to serve, uncaptured value-add and/or lack of contract enforcement discipline. Addressing leakage alone can be worth 100+ bp of margin potential to an organization.

  2. Focusing on pricing discipline-reducing unwarranted pricing variances (trimming the tail) across customers for similar products or services or not pricing in a manner that optimized volume relative to profitability.

  3. Leveraging differentiated pricing- or 'Courage Meter'- in order to capture the full margin potential associated with the underlying leverage you have with a given product or customer.

  4. Value pricing- worth a lot but hard to do, particularly in organizations with disparate customer touch points.

The TRC team is adept at understanding where companies fall in this journey and designing a tailored program and set of tools to upgrade pricing capabilities while driving near-in bottom line improvement. Beyond pricing, we also support our clients in the deployment of other critical performance disciplines such as mix enrichment and productivity management. Learn more about our work in this area via the thumbnails below.

Transport

Power Components Manufacturing Case Study

Context:

Company was losing $20M annually in price concessions as large customers had tremendous buying power and competitors were driving down price in a growing commoditized market

Project:

Application of the 'courage meter' as a basis for identifying near-in re-pricing opportunities and informing ongoing price logic and margin targets by region, product, and customer

Outcome and Impact:

From $20M in annual price concessions historically to a forecast price 'gain' of $5M in 2018 (+$25M)

National Food Ingredients Distributor Case Study

Context:

Large ingredients distributor that lacked consistent pricing processes and line of sight into pricing performance resulting in low margins and a need for a quick win and long term solutions

Project:

Comprehensive pricing program to address areas of leakage, reduce unintended price variances, and identify differentiated pricing opportunities 

Outcome and Impact:

Pricing playbook worth just over $6M in annual EBITDA improvement

Metal Distribution and Services Provider Case Study

Context:

Distributor generating returns lower than the competition and below the cost of capital resulting in the need for broad turnaround plan from strategy to commercial effectiveness

Project:

Profit enhancement plan via improved line of sight into cost drivers, profitability at the intersection of route, customer and product and external customer insights (e.g. headroom, decisions drivers, and competitive positioning)

Outcome and Impact:

Identified over $18M+ of EBITDA improvement 5 point improvement in run late EBIT margins post implementation

UK Consumer Packaging

Case Study

Context:

Market leader seeing significant top-line and bottom-line YoY declines in core business due in part to an ineffective pricing model that resulted in the company over pricing simple projects and under pricing complex projects

Project:

Developed a new pricing model to more effectively compete against disruptive low-cost competitors that allowed for transparency in pricing of additional value added services not being provided by the competiton

Outcome and Impact:

Business turned around from declining performance to YoY growth with no major market and/or competitive shifts

Regional Building Materials Distributor Case Study

Context:

PE owned Regional construction materials distributor with 10 distribution centers of varying performance had unstructured and undisciplined pricing resulting in significant unrealized margin

Project:

Identification of leakage and development of clear and actionable playbooks for Sales to execute; differentiated pricing tactics at both the DC and customer levels

Outcome and Impact:

Supported YoY revenue growth of 9% and EBITDA of 20% leading to sale of business to strategic buyer

NA Industrial Distributor

Case Study

Context:

Metal service center's Sales Force lacked consistency in pricing resulting in vast differences in profitability and significant margin being left on the table

Project:

Implementation of standardized pricing model to capture increased variable margin associated with processed commodities and smaller customers

Outcome and Impact:

15M+ in identified EBITDA potential

© 2018 by TRC Advisory