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Client Case
Right Price Means Happy Customers

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Higher prices often mean customers will defect, especially in commodity markets like personal computers. But, it is not always possible to avoid increasing prices when market conditions change.

This major PC maker need to get a better understanding of the pricing dynamics with its customers and what can be done to minimize risks.

Vaxa pricing expertise was put into action to find ways to keep and attract new customers.
  • the PROBLEM
  • discovery
  • Results

Tab Content One

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MegaPC became a leading player in the in PC. Its value proposition was the quickest delivery of the latest technology at the lowest price. How could customers not like it!

But all good things come to end sooner or later.

Other players entering the market caused an increasing price competition. Corporate customer responded by starting to demand that MegaPC keep pace with market-based pricing of their products.

One of the problems MegaPC had was that it wasn't efficiently structured and most of its deals were negotiated on a case by case basis--which increased the cost of sales. To offset this disadvantage, the company worked with its supplier to drive down component cost in unison with sales. The intent was to create a price guarantee but it proved to be very challenging.

These organizational, customer, and supplier issues made it an uphill struggle to have a coherent pricing strategy. Vaxa worked with the marketing team to address these and other challenges.

Tab Content Two

Vaxa worked very closely with the corporate marketing team to deaggregate the existing pricing structure to create a fact-basis on which insights can be drawn and a strategy to move forward.
PRICE GUARANTEE
  • Engaged existing customers to get their perspectives how well the current price guarantee was working.
  • Analyzed what customers were buying, their configurations and preference as a way to design alternatives to drive better prices and margins.
  • Worked with purchasing and suppliers to reexamine the component baskets to see if prices are flexible and/or alternate suppliers can offer better prices.
LIST PRICE
  • Working with marketing, finance, and purchasing, we built a pricing model to predict future sales with the current structure.
  • Use that as a basis to perform what-if alternatives to show the systems elasticity to regain margin from decreasing prices.
  • Brought the salesforce and customers together at the same time to share with them our concerns and get their feedback.
  • Use this input to move forward.
INSIGHTS
  • Price guarantee provide no assurance and creates little or no competitive advantage.
  • Eroding market pricing that is clearly visible to all gives customers a foundation for demanding lower prices.
  • Add behavioral pricing components that will additive to both sides.
  • Pricing is not a competitive weapon given PC commoditization and competitors ability to quickly respond.
  • Given the diversity of MegaPC business, some parts will more highly impacted than others.
RECOMMENDATIONS
  • Use price guarantees as a last resort in any sales situation. Be extra careful that it does not public knowledge that MegaPC will "do whatever it takes" to get a deal.
  • Add behavioral pricing elements.
  • Expand beyond the existing customer base into markets where "value based" pricing can be used.
  • Get customer longer term commitments.

Tab Content Three

Three of the five business units implemented the pricing strategy based on their specific segment needs.

Those three units saw growth rates much higher than those who didn't.
How can we help you?

To discuss how our team at Vaxa can help your business achieve true and sustainable growth results, please

Contact us.
Pricing is a critical factor in keeping customers and attracting new ones. When it is right, the company and its customers are happy. When not. it spells disaster.
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