Case-study

What are the current practices of product-pricing at local sales offices?

Business Development Manufacturing & Automation Industry

Transfer pricing Transfer pricing

Problem

AutomationCo. sells its products via Local Sales Units (LSUs) in each country. To sell these products, AutomationCo. utilised a transfer-price strategy. But recently few Local Sales Units were taking independent pricing decisions, which had a negative impact on revenue potential in those markets.

Outcomes

5

Key factors affecting pricing decisions identified

45

LSUs pricing to be studied through the developed tool

Situation

AutomationCo.’s global office sold products to the LSUs (local sales unit) at a predetermined price point and recommended they use a region-based end-user price. However, a few of the local units did not follow the recommended price levels. Thus the global office wanted to enhance its global pricing strategy, therefore it sought to comprehensively understand the local pricing practices and model.

AutomationCo. utilized Sprintly team to conduct in-depth research in 5 countries to thoroughly understand the factors that were involved in the pricing process. The Sprintly team collected and analyzed the data from these countries to provide the global sales team with a grasp on the general pricing situation at a local level.

Key research questions

The key questions in the project were:

  1. What are the current practices of product pricing at LSUs?
  2. What are the factors that affect LSUs pricing decision for end customers?
  3. How to improve and control recommended end-customer prices?

Our approach

Phase 1: Understand current global pricing recommendation process

The Sprintly team interviewed global center officers at AutomationCo., to understand the current pricing process and the assumptions made in the pricing model. Next, key stakeholders were identified to develop the research structure and tools for the LSUs.

Phase 2: LSUs pricing decisions analysis

In-depth Interviews with selected stakeholders at the LSUs revealed varying pricing practices and models. The Sprintly team identified the mismatch areas between global and local pricing approaches and the local reasons for pricing decisions.

Phase 3: Deep dive into pricing factors at LSUs

The Sprintly team created profiles for each LSU and discovered internal factors that were affecting local decisions. Both the Sprintly team and AutomationCo.s’ global team realized the factors that were overlooked by the global office. In addition, also identified critical external factors that needed to be periodically monitored to improve market share and revenue generated by the LSUs.

Results

Sprintly team helped AutomationCo.’s global office to identify the key factors that drove pricing decisions at the LSUs.

In addition, the Sprintly team identified improvement areas in the current process to increase the visibility of pricing decision-making from local to global level. This time-boxed sprint accelerated AutomationCo.’s shift towards local-based pricing that further impacted their revenue potential by 4X.