Faster Negotiations & Real-Time Dynamic Pricing

Cost, Margin & Demand-Supply Adjusted Pricing to forecast Raw Materials based on Commodity exchanges and on top of that a Margin Recommendation

Challenge

We worked with a leading global engineering materials company as they were struggling with:

  • Margin leakage from excessive discounting
  • Volume Churn at customers due to price increases
  • Customer churn due to sales having non-segmented pricing increases policies
  • Loss of deals In competitive commodity business due to non-market-adjusted (excessively high) pricing

“We cannot seem to get it right with pricing – it is either too high or too low. We need some real data to drive our decisions as our customers are very dissatisfied with our pricing patterns.” – Director Pricing, Strategy & Optimization

Approach

MRD understood that the client’s products can be bucketed into two different categories – commodities and specialties – both of which have very different market dynamics. Commoditized products are sold in large volumes, have heavy competition, and are sensitive to price changes. Specialties, on the other hand, are innovative value propositions, used in specific and advanced applications and customers accept paying a premium for these.

For the commodity business, we deployed a dynamic pricing algorithm based on their raw material fluctuations. The solution first forecasts raw materials based on commodity exchanges and on top of that a margin recommendation is made base on other variables such as customer aggressiveness, regional competitive differences, etc. MRD also built a price steering module to help. Pricing managers steer pricing to meet evolving business objectives.

For the specialized business, we deployed predictive pricing algorithms that focus more on value-based pricing, factoring in specialized product features as well as customer negotiation history to compute price recommendations for sales.

Deliverables

The key deliverables of the Price to Premier Project are:

  • A Dynamic Price Model for commoditized business helping sales
    maximize conversion on deals
  • A predictive price model for specialized business helping sales
    maximize conversion on deals

Results

  • 9% Margin uplift & improved commercial control in execution for
    specialized business
  • 29% Higher conversion on monthly negotiated commodity
    business
To know more
Contact Us