Case-study

What pricing model do customers prefer for product and service purchases?

Supply Chain Commodities Industry

Supplier sourcing Supplier sourcing

Problem

ProcessCo.s’ industry has experienced high consolidation over the last 15-20 years. With only 4-5 large players in the market, ProcessCo.s’ customers now had limited options to choose from. Thus ProcessCo. was concerned with any changes in its customer supplier strategy as it could have a large impact on their financial performance.

Outcomes

6

Sourcing criteria identified

18

Decision making factors analyzed

Situation

ProcessCo.’s key customer segment was facing two main challenges:

  1. Overall market and growth decline
  2. Few supplier options & limited knowledge

To counter supplier power, ProcessCo.’s customers started allocating smaller contracts to new suppliers, to keep competition alive in critical application areas. The customers were also highly risk-averse towards any new solutions a small loss in production could significantly impact their annual bottom-line results.

Key research questions

Q1. Do customer companies prefer multi-supplier strategies to hedge risks?

Q2. What are the pros and cons of each strategy from each key decision-maker perspective?

Q3. What pricing model do customers prefer for product and service purchases?

Our Approach

The project was executed in three phases:

Phase I: Supplier sourcing strategy and risk hypotheses developed

Sprintly team interviewed senior management at ProcessCo. to understand their perspective on the key topics that potentially impacted the customer’s sourcing decisions. Then it listed the components of each topic and further developed hypotheses for each.

Phase II: Prioritization criteria identified

During this phase, the Sprintly team prioritized the six sourcing topics based on their impact on purchase influence and decision making. To gather these insights, in-depth interviews were conducted with 29 industry experts from three different profiles i.e. P&L, Production and Sourcing. The findings revealed the priorities of each business function and leader based on each profile’s key responsibility area, KPIs and reporting structure

Phase III: Analysis of buyer motivation and willingness to pay

Based on the insights gathered, the Sprintly team created a communication strategy for ProcessCo. based on each stakeholder’s function priority. Finally, the topics were listed in order of willingness-to-pay.

Results

ProcessCo. utilized Sprintly team to accelerate progress on a critical company topic. Based on the outcome ProcessCo. revised its sales strategy and customized it to target the KPIs of each business function at the customer’s organization.