Price Optimization: A Case Study on How a Leading Consumer Goods and Electronics Manufacturer and Retailer in Europe Achieved Revenue Growth of Over 5%
Client: Leading Consumer Goods and Electronics Manufacturer and Retailer in Europe The consumer goods industry’s growth over the past few years has been nothing short of exhilarating as companies operating in this industry space have launched innovative products to meet an ever-increasing array of human needs and desires. Additionally, these companies have expanded rapidly into […]READ MORE >>
Client: Leading Consumer Goods and Electronics Manufacturer and Retailer in Europe
The consumer goods industry’s growth over the past few years has been nothing short of exhilarating as companies operating in this industry space have launched innovative products to meet an ever-increasing array of human needs and desires. Additionally, these companies have expanded rapidly into the booming consumer markets of the developing world. And to make this stellar growth possible and profitable, they have aggressively built global scale across the value chain.
The consumer goods industry is mainly divided into four groups: food, beverages, small appliances, toiletries, and cosmetics. Moreover, the consumer goods industry is the foundation of the modern consumer economy. It not only generates an enormous portion of the gross domestic product but also drives massive amounts of money into other industries, notably retail and advertising.
Let’s take a look at some of the fundamental factors that will influence the growth prospects of the consumer goods industry in the coming years.
- Changing Consumer Demands: Consumer goods companies need to be consumer-focused and dynamic as the demand from the consumers tends to fluctuate rapidly. For instance, consumer preferences have significantly transformed in recent years as the demand shifts toward sustainable and healthier options. Subsequently, manufacturing success is closely related to time-to-market and new product introduction capabilities. Moreover, the success and profitability of any organization in the consumer goods industry space are heavily dependent on how they address the changing needs and demands of the consumers in a cost-effective manner.
- Shrinking Operating Margins: Lately, consumer goods companies have started facing the challenge of meeting global price points owing to the competition. This creates an additional pressure, as companies need to ensure the distribution of high-quality products while finding innovative ways to cut costs. Additionally, companies also need to take into consideration the fluctuations in factors such as oil prices and their effect on transportation costs.
Such factors are forcing companies in the consumer goods space to leverage solutions like price optimization. Price optimization help companies resolve inconsistencies in prices and discounts across geographies for customer segments. These solutions also provide pricing information on comparable deals for better pricing and quote management to ensure the distribution of high-quality products, while finding innovative ways to cut costs.
The Business Challenge
A leading consumer goods retailer, specializing in electronics manufacturing, wanted a solution for dynamic price setting and discounting to allow sales representatives to close deals much faster for their B2B clients. The consumer goods manufacturer was facing challenges in optimizing prices due to time-consuming multi-tier (account manager, pricing, and sales managers) approvals and negotiation process to ensure that the proposed costs met the internal guidelines.
The ancillary objective of the client was to monitor the prices of deals across different product and customer segments as well as geographies and ensure data accuracy by accessing internal data from their sales, invoicing CRM, and ERP systems. Furthermore, the consumer goods manufacturer wanted to develop a holistic price and discount management solution to ensure pricing integrity and streamline the process of price quoting.
Data used, models applied, and the dashboard themes that we developed
To help the consumer goods client deal with specific business challenges, the industry experts built a data dictionary for sales, account, product and promotions data. Some of the assumptions and exclusion criteria applied for data cleansing were: missing values for product ID and sales, outliers in deal quotes and excluding rows with zero sales values, etc. Furthermore, the industry experts integrated multiple data sets at Sales ID, Account ID, and Date-time stamp level.
Additionally, to meet the client’s specific requirements, the price optimization experts:
- Applied clustering methods to defined customer segments based on key demand drivers, customer type, product and pricing data
- Created Market Response Models to
- Arrive at offer price and discounts
- Calculate profits based on costs
The price optimization experts at Quantzig also created a real-time tracking dashboard integrated with the pricing models.
Insights and Business Benefits for the Client
Strategies that we recommended based on our analysis to drive higher sales based on optimal price setting
- Established a complete visibility of product prices, discounts, sales and customer segments to the organization hierarchy based on designation
- Helped the consumer goods client streamline the entire order to quote process to improve pricing transparency across geographies and segments
- Resolved inconsistencies in prices and discounts across geographies for same customer segments
- Provided pricing information on comparable deals for better pricing and quote management
- Provided inventory information for sales representatives to account for capacity and order planning
- Helped the consumer goods client overcome challenges including:
- Data consistency and accuracy
- Effective segmentation of customers
- Real-time tracking of prices across customer segments and geographies
Additional Benefits of the Solution Offered
- Helped improve deal closure rates for sales representatives
- Dynamically optimize the prices and discounts for different customer segments
Furthermore, the pricing analytics experts determined the optimal price that maximizes contribution by simulating sales and revenues based on customer segments, price, product, etc.