Solving the Vicious Cycle of Price-Based Competition
The Challenge: A $30 billion manufacturer of components, systems, and electronics was facing increased pricing pressure from its major OEM customers. The company needed to better understand how to establish a more attractive and profitable position with these large OEM customers.
Assessment: Blue Canyon’s in-depth analysis confirmed that extreme price pressures existed in select customer environments. The analysis included economic value models, customer economics, OEM portfolio selection, and OEM pricing strategy, and competitor response assessments based on game-theory models. At the same time, other segments were identified in which there were opportunities for differentiation.
Strategic Solution: Blue Canyon developed best-in-class approaches towards pricing that responded to supply chain initiatives and competitor challenges for this client. These approaches outlined clear, concise assessments to determine effective pricing strategy in each customer application. At the same time, we initiated action plans involving product development, customer relationships, and service delivery to strengthen the firm’s ability to win in differentiated segments of its market.
Results: Specific high value product differentiation concepts, new business system offerings, and channel support ideas were created and offered to select OEM customers. The client enjoyed a 5-7% margin improvement as the organization revamped its processes, programs, and management approaches toward pricing strategies.