PriceGain’s ability to model the complete value chain helped this global manufacturer fend off gray market and generic competition in a strategic product category.
Situation: Increased competition from low-cost brands made optimal pricing a challenge.
Our client is a leading global manufacturer of high-value IT and electronics products. Increased competition from lower-cost generic brands and grey market imports was driving down unit sales, top line revenue and margins for supply products. Due to risks of cannibalization, and an even higher level of grey market activity, introducing new product offerings made pricing difficult. How could our client best meet these threats while recognizing country specific market conditions and grey import challenges? Could the company also maintain a high-value brand position in terms of its pricing?
Solution: Flexible pricing model posted online for ease of access.
Market surveys were conducted in all major countries in the region of interest and country-specific price/demand relationships were established. In parallel, we modeled the value chain from our clients manufacturing facilities through all steps including wholesalers, resellers, and retailers down through to the consumer. The resulting model was flexible enough to represent all products in the category as well as the main competitors products in each country. The model was published online and used by product and brand managers to optimize prices.
Results: Optimal prices were revealed for each region which enabled more favorable channel deals.
Our analysis revealed that willingness to pay for our clients products is strong but varies across the region. Using the online tool, the companys managers were able to find optimal prices for products that maximize gross profits with minimal losses in market share. The tool also revealed that some products would cannibalize others and lower profitability. Finally, the PriceGain tool helped our clients managers clearly understand how profits were split in the distribution channel. Ultimately, this helped them negotiate more favorable deals with their channel partners.