Business Products Distributor Maximizes Margin Opportunities

A multibillion-dollar North American business products distributor with tens of thousands of products and thousands of dealers already knew that effective pricing strategies were key to unlocking margin growth. It would soon learn that only the best pricing technology partner could help realize that goal.

Eighteen months after selecting and implementing a PROS competitor’s software – which included eight frustrating months only to deploy the analytics piece – the company chose to permanently shut down the competitor’s technology.

CHALLENGE

The individual responsible for the distributor’s pricing initiatives described the company’s situation as “going down the right path but with the wrong horse.” Although it literally left millions of dollars in profits on the table because of delays and the competitor’s pricing software’s lackluster performance, this distributor still believed there was a significant margin opportunity with the right pricing technology.

The ideal technology partner would help achieve a few key objectives:

Help uncover pricing improvement opportunities
Enable the company to become more nimble in executing price changes in the field
Avoid losing revenue and volume opportunities because of poor pricing decisions

After an intensive investigation into best-of-breed pricing science, price optimization software and implementation effectiveness, the company selected PROS as the ideal solution to help achieve its goals.

SOLUTION

The distributor’s executive management looked to PROS and its culture of partnership to help turn the company’s pricing situation around. PROS already possessed relevant experience from deploying price optimization software at another business products company, so this company’s management expected to capitalize on PROS industry-leading experience.

PROS helped the company’s distribution division identify and react to market changes so that time-sensitive revenue and volume opportunities were captured. In addition, PROS enabled pricing teams and executives to focus on the strategic management of their pricing.

PROS prescribed a phased implementation approach to capture the greatest return on investment in the shortest amount of time:

Phase 1: Replaced the failed competitor pricing software to help the company identify margin improvement opportunities for its distribution operations and its independent dealer network that serves as the company’s sales force for the broader market
Phase 2: Ensured the distributor’s pricing group could define company-wide pricing strategies according to corporate objectives of profitability, market share and asset utilization, and enabled pricing managers to set targets (target, floor and stretch) for science-based pricing guidance during deal negotiations
Phase 3: Made science-based pricing methods set by the pricing group available to the distributor’s sales team at the time of deal negotiation and enable sales representatives to access price guidance and the projected profitability of a deal, or a deal score, to help them determine the most profitable terms to meet company objectives.

RESULTS

The initial deployment of PROS Scientific Analytics was completed in 25 days with a documented revenue uplift of $21 million. Pricing managers identified unprofitable customers and targeted their contracts for renegotiation. Management expects full payback on its PROS pricing investment within a year or less.

CONCLUSION

PROS pricing solutions delivered several distinct advantages over the competition:

Delivered quick wins in margin improvement with measurable results in less than a month
Enabled pricing managers to set targets (e.g., target, floor and stretch) for pricing guidance during deal negotiations
Quickly and easily identified customers who exhibited a negative margin profile
Provided sales representatives access to real-time pricing guidance and projected profitability on every deal