Implementation of a price margin project to leverage margin potentials
Initial situation and objective:
- A company with a broad customer/product portfolio and a leading market position.
- Europe-wide sales are carried out by own sales organization, in combination with a historically grown network of distributors
- The management team critically questions the existing transparency with regard to contribution margins
- Objective: Create transparency and define measures to improve low-profit products, customers. Introduction of a results-oriented customer care model
- Data collection from a wide variety of sources and subsequent data evaluation. Definition of recommendations for action in order to improve the situation with products and customers with poor results.
- Determination with marketing and sales team which condition types (e.g. discounts, packaging types) will not be offered in the future to minimize outliers (business rules)
- Attention for profitability-oriented portfolio management shown – “facts instead of assumptions”.
- Action packages agreed for critical customers/products: Price increases, product adjustments/phase-outs, transfer of certain customers to dealers
- Total margin increased by > 5% in year 1 (calculated from end of project)