In this scenario we are going to see how distributors can identify and eliminate underperforming products or customers through customer or product insights analytics KPIs. Underperformance can be seriously detrimental to distribution companies and it gets more complicated when it cannot be identified and misused strategies are thus put in place. With Pricefx analytics distributors can gain valuable insights into customer and product behavior, allowing them to make the right call when it comes to pricing.
Use Case Situation Description
User Role:
Pricing Analyst/Manager
Business Objective:
Our business strives to maintain prices and sales processes that generate sufficient margin from each of our customers. Our pricing and our discounting processes take into consideration product costs, customer volume commitments, customer cost to serve, rebate scenarios, and other cost items to generate an expected margin. Our goal is to have all customers and products meet certain margin thresholds, sometimes based on volume, but also absolute values of margin.
Complication:
During sales negotiations, we sometimes give outsized discounts to certain customers, resulting in lower-than-expected margins. Monitoring systems today are not capable of quickly identifying margin performance of a customer or product against their peers or against plans or expectations for that customer or product group. Additionally, even when problems are uncovered, it is not straightforward to know what actions to take or specifically how to execute those quick actions.
Capability Needed:
Analytics capabilities that analyze margin performance against the other customers and products and against the plan for that customer or product that is linked to an execution system that can change parameters.
Benefit:
Company overall margin will improve.
KPI:
Gross margin change. This can be measured at the account level, or at higher levels in the enterprise (product, market, geography, or total business).