What they wanted
Our client, a leading logistics provider, had an urgent need to increase margin due to a sudden rise in operational costs. The company, which provides logistics services to over 30,000 customers, has a historically dispersed and fragmented commercial setup. Using differentiated approaches to tariffs components, it substantially lacked transparency on how prices were set across a mix of specific services (e.g. delivery and special parcels) provided to its customers. Furthermore, prices had recently been raised, requiring a new approach to increase prices again.
IG&H was asked to:
- Leverage detailed insight into existing customer-level pricing and setup.
- Develop a data-driven pricing strategy, starting with an initial campaign where intelligent logic, benchmarking, and margin analyses are used to introduce a more logical and sound argumentation for price increases.
What we did
Our first major step was to create a bottom-up pricing mapping based on the most important service offerings and surcharge components on a customer-by-customer basis. Additionally, we identified operational and contractual KPIs that could provide a basis for customer-specific price increase suggestions and argumentation. Following this, we classified customers to compare product mix and price components like-for-like. Based on previous insights, we developed a logic to intelligently suggest new prices per customer, targeted towards a top-down 5% margin increase.
The second step involved the launch of an interactive comprehensive dashboard for 140 sales professionals. The goal: benefit from the newly gained insights and enable simulations of the proposed price increases. A thorough argumentation for the negotiations was storylined to support the salesforce. This was further elaborated upon during a two-day sales conference, which we also organized to further introduce the negotiation methodology based on pricing evidence and to increase suggestions made by the tool. Furthermore, we ensured that the salesforce received hands-on training and practiced with the tool, providing a solid foundation for implementation in the field.
Our third step consisted of tracking compliance as well as monitoring progress of the entire negotiation process down to the customer and product levels. This provided a foundation for increasing the effectiveness of sales professionals in achieving their goals. Also, it allowed for timely steering on different management levels. Finally, it enabled organic testing of pricing elasticity and implemented logic to refine our proprietary setup in the future.
What we achieved
Within a short, five-week timeframe, we went from collecting pricing-relevant data from various sources to delivering:
- A 4.8% profit margin increase.
- Institutionalization of a more sophisticated, data-driven commercial approach to pricing and negotiations.
- Increased awareness of the power of data science in an inherently complex setting. This was confirmed by a continued engagement in operations. Also, we kept building the in-house capability for this client.
What they said
“IG&H is a very pragmatic and strongly output-oriented consultancy with a strong data science capability. The consultants rapidly understood our requirements and developed an actionable approach, perfectly integrated with our teams and organization, and delivered great results in a very short period of time.”