To improve profitability, a leading water technology company knew they needed to move away from a simple cost-plus approach and price their products by the value perceived. With more than one million product configurations across more than 150 countries however, that seemed a stretch goal. And it was, until they partnered with Vendavo.
To price products that range from generally available, common components to specialties available only from the company based on customer perceived value across all markets, this leading innovator selected Vendavo® Pricepoint. The solution could not only provide them with value-based pricing but also global alignment across regions, product lines and business units as well as timely, accurate generation of quote pricing for new configurations.
Phase 1 with Spare Parts
The company chose to launch the project within their spare parts business. They began by dividing their spare parts into 3 segments:
- Key parts designed by the company
- General parts designed by the company but less specialized
- Standard parts
Key parts are the most important components to price correctly for profitability. To ensure accuracy, market surveys were conducted with customers and internal employees to develop perceived value for key parts across 8 countries. Three levels of key price drivers were identified and used to develop using AI/ML pricing techniques.
Customer perceived value was considered along with product attributes such as weight, diameter, and power. The repair threshold for each piece of equipment was also included for pricing evaluation. Products which are economical to repair instead of being replaced are reflected in the customer’s options in pricing.
These and other insights were used to build a framework in Vendavo Pricepoint to support new parts pricing, with easy price maintenance and revisions – all tied to the company’s value based and market driven pricing strategies.
“I receive a lot of questions about why pricing is the way it is and now I can quickly look up the product and explain the logic of the pricing. Sales now agrees and can defend that price,” says their pricing manager.
Large-scale Rollout
Based on the value Vendavo has brought for their spare parts pricing, Vendavo was then implemented to support pricing for the company’s portfolio of 300 base products, which in turn has millions of possible product configurations.
To learn more about how this leading innovator expanded their value-based pricing and price a configuration for fast quoting, download the full case study.